Written by Don Ratzlaff Tuesday, 29 September 2009 13:15
“For some reason the consumer knows about this, which is kind of surprising. We’ve had people asking us about it for two or three weeks already.”—Rod Koons, owner of Rod’s Tire & Service
Tire specialists in Hillsboro and Marion say it’s not clear how President Obama’s recent 35 percent tariff on tires made in China will affect local consumers.
The tariff, which went into effect Sept. 26, will amount to 35 percent the first year, 30 percent the second year and 25 percent the third.
Obama said his decision was intended to bolster the ailing U.S. tire industry and fulfilled a campaign promise to “crack down” on imports that unfairly undermine American workers.
Rod Koons, owner of Rod’s Tire & Service in Hillsboro, said he thinks the impact on the price of tires at his business will be negligible.
“Most of what we’ll see affected are the entry-level, lower-end, light-truck stuff that comes out of China,” Koons said. “It’s not across the board that everything round and black are going to see price increases.”
He said businesses that focus on the entry-level tire market, because prices are lower, may be hurt. But at his business, sales of that kind of tire make up 10 percent or less of his tire revenue.
“A lot of independent-type places sell that (kind of tire) when they are not affiliated with a certain brand because all they have going for them is that they can sell at a cheap price,” Koons said. “But it’s lower quality.
“The product quality isn’t at the level we want to put out there and give our customers,” he added. “Contrary to popular opinion, we’d like to see tires last longer because it makes our customers more happy.”
Craig Settle, who oversees tire purchases at the Cardie Oil Tire & Service Center in Marion, said it’s too early to know how tire prices will be affected.
“It was just announced last week; we didn’t have a whole lot of time to react,” he said. “We did stock up on some brands of tires so we could do what we can to help some of our customers out.
“We know it’s going to drive the cost of tires up,” he added. “But we’re not really sure how that’s going to play out.
“Instead of a tire made in China going up 35 percent, I think they’re going to raise prices across the board, maybe in the 8 to 12 percent range.”
Both local tire dealers said all U.S. tire manufactures, including the top name-brand companies, have plants in China and other countries.
But with tire sales down 8 to 12 percent nationwide, Koons said he doesn’t expect anyone to initiate across-the-board price increases.
“As hard as people are fighting for market share right now, I would be surprised to see any inflation,” he said.
Settle said the one customer base that may be affected most by the tariff are those who need to buy cheaper tires because they can’t afford high-quality models—even though the more expensive tires are a better buy in the long run.
“Some customers of ours need to focus more on the short term, and the more inexpensive tires are a better fit for them,” he said. “This tariff, on the surface at least, looks like it’s going to affect them the most.”
Koons said tariffs on foreign products are nothing new, but what surprised him was how aware his customers were of this one.
“For some reason the consumer knows about this, which is kind of surprising,” he said. “We’ve had people asking us about it for two or three weeks already.”
Koons said it might be because the tariff is perceived as a political move by the president to garner the support of the large U.S. Steelworkers Union, which includes tire workers, for his health-care proposal in Congress.
“That’s what’s driving the whole thing,” Koons said. “It makes some sense—we’re going to tariff something coming in that’s taking jobs from Americans. I assume that’s the ploy being used.”
He added, “We have tariffs all the time on things, but for some reason people have really chimed in on this thing.”
“There’s certainly plenty of strong emotions on the Internet,” he said. “You can hop on Google and find plenty of articles about it.”