US tariffs to have 'limited impact' on global tire industry

Dublin – The Trump administration’s imposition of tariffs on imports of car, truck and other tires will predominantly impact US consumers, who are going to pay something like 20-25% more for these products.

That’s according to David Shaw, chief executive, Tire Industry Research, who believes that US duties are “not going to change a lot elsewhere, as everywhere else around the world is hit with this same 25% tariff.”

“There's no benefit in going say from Cambodia to Laos, for example, if you get the same you get hit by the same penalties,” he commented at the recent annual meeting of the International Institute of Synthetic Rubber Producers.

Meanwhile, Shaw noted at the Dublin event, there is “nowhere near enough” capacity in the US to meet demand, with up 65% of all tires imported.”

And, with Goodyear “way down the profitability table,” the US tire major would likely use the tariffs situation to increase the prices for its tires.

“Goodyear needs to upgrade its profitability, and they will do that by raising prices,” said Shaw. “Prices for Goodyear tires will go up by the same amount as those all tires” on the US market.

Asked about the impact of tariffs on trade flows, Shaw said there would probably be some relocation of production but “that's going to take a few years to develop.”

For instance, he noted that it took two or three years for Chinese suppliers to relocate production overseas in response to the EU’s imposition of tariffs on their truck & bus tires.

“That's been the history of all of these things,” added the UK-based analyst. “I think there will be some shift in the sourcing and supply of tires, but not nearly as much as people might have expected.”

However, Shaw did suggest that US tariffs might have a significant impact on Mexico, with question marks now over certain planned tire plant projects, including by Sailun Group and ZC Rubber.

We will report further on this topic in the May/June issue of European Rubber Journal magazine