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Price of a Job Saved by China Tire Duties: Nearly $1 Million
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Price of a Job Saved by China Tire Duties: Nearly $1 Million

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Price of a Job Saved by China Tire Duties: Nearly $1 Million

President Barack Obama was so proud of the jobs saved by shutting off imports of Chinese tires he cited the action in his 2012 State of the Union Address. According to analysts Gary Hufbauer and Sean Lowry of the Peterson Institute for International Economics, known for its support of free trade, the victory had a heck of a cost: at least $936, 000 for each job saved.

Bloomberg News

Here’s how their analysis works: They accept Mr. Obama’s claim that the action, which was legal under World Trade Organization rules, saved 1,200 jobs. But the result of slapping heavy duties on Chinese imports was a stiff increase in tire prices. The vast majority of the tires sold in place of Chinese tires were made in other foreign countries, the analysts say.

In all, Americans spent $1.12 billion more than they otherwise would have on tires. Divide that by 1,200 jobs, and the cost is $936,000 per job.

But that’s not the end of the costs. The additional spending on tires – essentially the same effect as a tax – meant that Americans had $1.12 billion less to spend on other things. Messrs Hufbauer and Lowry figure that could have reduced retail employment by about 3,500 jobs. In the end, they say, the tariff was a net job killer.

So who won? “Most of the money landed in the coffers of tire companies, mainly abroad but also at home,” said the analysts.

What about the value of standing up to the Chinese? Well, the Chinese didn’t back down. Instead, they retaliated by slapping $1 billion in tariffs on U.S. exports of chicken parts. The U.S. objected and the two countries are battling out that action at the WTO.

“The best thing about the tire tariffs is that they expire in 2013,” Messrs. Hufbauer and Lowry conclude.

Price of a Job Saved by China Tire Duties: Nearly $1 Million - Real Time Economics - WSJ

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