Embed Doc
Copy Link
Readcast
Collections

CommentGo Back

Download

Economic internal assessmentMunkhbadam.D

Tariff hike inflates price of some tiresShop owners say jump affects low-end products byJessica M. Karmasek Daily Mail staff CHARLESTON, W.Va. -- Car owners looking to get new tires before winter could be in for some sticker shock.A recent boost in tariffs on tires imported from China has forced local shop owners to increasethe price of many low-end tires.Bill Kepple, president of Marty's Tire Store in Charleston, said entry level, or low-price, tires athis shop went from about $50 to $58.50."The problem with this is that it doesn't affect people who are buying Michelins and Goodyears,"he said. "It's hitting the lower economic people - much like how Cash for Clunkers took all of theused cars off the market."It's really devastating to those on a smaller income, unfortunately."The Obama administration recently boosted the tariff on tires imported from China from 4 percent to 39 percent, following a petition from the United Steelworkers Union.The Chinese government scowled at the new U.S. tariffs, which were boosted because Chinesetires are pouring into the states.Also, some have questioned the safety of the Chinese products, citing a van crash in 2006 inPennsylvania that killed two passengers.Last year, 46 million tires were shipped to the U.S. - up from 14.6 million in 2004.Teri Blevins, assistant store manager at Appalachian Tire in Charleston, said the increase intariffs means the store will no longer be carrying some low-end tires.But the tariffs aren't completely to blame for the raised prices, Blevins said.Consumers already had been facing an increase in tire prices that began years ago and jumpedeven before serious talk of tariffs began.The average price of tires for passenger vehicles rose 9 percent in 2008 compared with a year earlier, and 24 percent compared with 2005, according to Modern Tire Dealer, a trade publication.Blevins points to higher gas prices."It's been a slow-moving process," she said of the spike. "Part of the problem is that people don't buy tires every year, so it is sort of a shock."But when gas prices started going up, that's when the tire prices really started going up."Because of that, more people are conserving, choosing not to buy new vehicles and insteadmaintaining what they already have, she said.A story in the Wall Street Journal earlier this month said more tire makers are pushing to equipnew cars with higher-profit specialty tires that can run at higher speeds and feature such high- performance traits as short, stiff sidewalls, which provide firm handling.

Page 1

Economic internal assessmentMunkhbadam.D

As a result, more vehicles such as the commuter sedan and family minivan are arriving fromfactories with tires once seen mostly on sports cars like the Porsche Carrera or ChevroletCorvette.Dozens of new cars on the market share another trait that makes their tires more expensive:large-diameter wheels.Car owners can generally opt to replace tires with a lower-end name brand or so-called off-labelmodels, depending on the vehicle.But with more new vehicles equipped with these specialty tires, finding low-end tires that fit proves difficult.This article is about recent import tariff which US imposed on import of Chinese tire and itsconsequence. How market is reacting to the tariff and how this tariff is affecting to the economy.The tariff is one of the methods of protectionism. Tariff is a tax that is charged on importedgoods. The aim of the tariff is to protect the country’s domestic economy from the foreign producers. And also defend their domestic producers from the lower price which is the world price. Tariff increases the price of the imported goods so it can help the domestic producer tokeep their production. Because world price is usually lower than the domestic price of the product so domestic producers cannot compete with lower price. And the consumer will beattracted by the lower price so they will start to buy the imported goods. Thus, the domestic producers cannot recover their cost. Even if they want to sell at world price they will losetherefore government need to intervene. They impose tariff from this domestic producers cangain and government can increase their revenue. But consumers will pay more for the goods andthe revenue of the foreign producers will decrease but it doesn’t mean they will hurt becauseusually they big producers.

Page 2PriceDomestic

Economic internal assessmentMunkhbadam.D

a b cBefore the tariff q

amount of tires were consumed at world price P

. Quantity of Domestic production was q1 and the quantity of imported tires were q

to q

. When the tariff imposed theworld supply curve will shift upward at the same time the world price will increase from p

to p

.So now the total quantity will decrease from q1 to q

. As a result the domestic producers increase production to q

. So their revenue increased now their revenue is q

×p

.Foreign producers willsupply q

to q

. But they need to pay the tariff to the government. Government earns b as their revenue which means foreign producers need to pay b for the government.The reason for USA imposing the tariff can be the protection. So they can protect their domestic producers from the Chinese tire producers. But at the same time consumers are feeling anxiousabout the tariff because consumers need to buy tires at higher price. People don’t buy tireeveryday but the demand of one nation is quite big. USA imposed tariff on tires imported fromchina from 4 to 39 percent which is quite high. Now in US the local shops and consumers arehitten by this tariff. Tariff is mostly affecting for the people who have lower income. Local shophad difficulties because the demand is decreasing because of the higher price. The price is toohigher for the consumer because the past few years the price of the tire also increased. TeriBlevins, assistant store manager at Appalachian Tire in Charleston, “said the increase in tariffsmeans the store will no longer be carrying some low-end tires”. Which means that the localshops will start to sell the tires which remained from the past. Thus, consumers will start to buythose bad quality tires at higher price. And also article mentioned about the domestic tire producers are trying to sell their tire. Their tire is also expensive for the consumers becauseconsumers used to buy the less priced Chinese tires. And producers are pushing the car companies to equip the cars with their tires. So they can sell their tire. And producers are tryingto make a new tire with high efficiency probably with less price. In the article Brevins mentionedabout the gas price increase. She said that if gas price rise then the tire price will increase insignificantly because people will not buy new car indeed they start to conserve. So the tiredemand can decrease if so then the price of the tire will increase. So she said that the gas pricecan affect the price of tire directly.Wordcount=718

Page 3

DomesticWorldWorld SupplyQuantitqqqqpp