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The global financial crisis and protectionism

China more than tripled its share of the U.S. market from 2004 to 2008 prompting U.S. steelmakers to lobby for protection. Their efforts were rewarded by the decision to impose a three-year tariff. China immediately complained that the policy violated WTO agreements, but ultimately the WTO ruled in favor of the United States.

Translating this same problem to the tire industry:

1. Do you agree with the decision to impose tariffs on tires imported from China? What benefits does the new policy bring to the industry in the U.S.? What problems could the tariffs create? Why should firms be concerned?

2. How might the tariffs imposed by the United States actually harm some U.S. companies and workers? What might happen when the tariffs expire? Why should firms be concerned?

3. Discuss the implications of the tariffs for U.S. consumers. What impact do the tariffs have on tires prices for U.S. buyers?

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Solution Preview

1. I think that the decision to impose tariffs on tires imported from China is a good decision, due to the fact that it will give US Steelmakers time to regroup and take back their share of the US tire market. This policy will provide the industry in the US with a window of opportunity to reestablish themselves as a major player in the US tire market, as well as to develop advanced marketing methodologies that would help them to maintain their grip on the US tire market once the tariffs are ...