Port of Los Angeles hurt most by China tire duty increase, Canada and Japan possible winners

The Port of Los Angeles is one likely loser from President Obama’s first important international trade decision, a decision to level punitive duties against Chinese tire imports into the United States for three years.

Canada and Japan, which are the other two leading players in U.S. tire imports, stand to benefit.

The ultimate loser is the U.S. consumer, who will almost certainly see an increase in the price of tires, but the decision will affect shipping lines, dockworkers, warehouse owners, logistics companies, retailers and others in the supply chain. A recent position paper from the Cato Institute suggested the duty would most affect the poorest U.S. citizens, those most sensitive to price increases.

Almost 50 percent of all new tires imported from China into the United States in 2009 have entered at the Port of Los Angeles, according to WorldCity analysis of the most recent U.S. Census data. That data, released Thursday, covers trade through July. Top 10 U.S. Seaports for Chinese Tire Imports

The Port of Savannah accounts for 9.16 percent, the second highest total, and the Port of Long Beach is third with 8.93 percent. Ports in Charleston, S.C., Jacksonville, Fla., and the Seattle area are also likely to feel the effects of the restrictions.

The logic employed to make the decision is that U.S. jobs have been lost to lost-cost Chinese imports. But it is rarely clear immediately the impact of trade policies. For example, other countries might benefit more from the decision than U.S. workers. China does not dominate the market, although it is the leading supplier.

China, overall the United States’ No. 2-ranked trade partner behind Canada, has been the nation’s largest supplier of new tires since 2006, when it surpassed Japan and Canada for the first time. Those three have, for years, controlled about 55-60 percent of all imports into the United States. China first surpassed 20 percent of the market in 2006, when both Japan and Canada fell below 20 percent for the first time in years. Source of U.S. tire imports

China’s market share through the first seven months of 2009 has widened, largely at the expense of Japan and Canada, to 28.48 percent while Canada controls 17.75 percent and Japan 15.06 percent. Most of the Asian imports enter the United States on the West Coast of the United States while Canada’s enter primarily in the Detroit area, home to the automobile manufacturers and the workers’ unions who supported the imposition of duties.

Overall, tire imports are a relatively insignificant U.S. import, accounting for about one-half of one percent of all imports, although that percentage has risen slightly over the years. It ranks as the No. 31 ranked import. To China, new tire imports are also relatively insignificant, accounting for about 0.79 percent of all its imports into the United States.

The United States exports new tires as well, about half as many as it imports, and that total has been growing over the years as well. Canada and Mexico are the primary recipients though their market share has diminished from almost 75 percent in 2002 to about 65 percent through the first seven months of 2009. U.S. exports to China, while having grown rapidly, equal 0.72 percent of the total. But in 2002, that percentage was a fraction of that, at 0.09 percent.

But, for starters, the decision will affect Los Angeles. Already, the Los Angeles Customs district, which includes both the Port of Los Angeles and Long Beach as well as Los Angeles International Airport and is the nation’s busiest, has seen trade swoon in 2009. Through July, the Customs district’s trade is off $58.37 billion, or 27.75 percent.

The precedent-setting decision marks the first time the United States has used special powers that were part of China’s 2001 ascension into the World Trade Organization, a fraternity of most of the world’s countries that governs and referees trade issues. It is the Obama Administration’s most visible trade decision since becoming taking power in January.

It also comes shortly after the G-20 nations agreed not to revert to protectionist measures in the face of the global recession, a couple of week before another G-20 meeting in Pittsburgh and two months before President Obama is scheduled to make his first trip to China. Both China and the WTO immediately criticized the decision. Neither Canada or Japan complained.

The tariff will be imposed on cars and small truck tires at 35 percent the first year, 30 percent the second and 25 percent the third, according to published reports. A federal trade panel responsible for making a recommendation to the Administration had recommended higher duties: 55, 45 and 35 percent.

The issue arose from a complaint filed by the United Steelworkers.