The Three Influences and Countermeasures of the "Double Counter-revolution" Cases in the United States
On July 14, 2015, the US International Trade Commission announced the final results of anti-dumping anti-subsidy investigations on passenger car and light truck tires originating in China and ruled that China's exports to the United States would cause substantial damage to the U.S. industry. Since the US Department of Commerce had previously ruled that the above-mentioned tires exported by China to the United States had dumping and subsidies, the latest ruling of the International Trade Commission means that the United States will formally impose taxes on such products. Chinese manufacturers will be levied with anti-dumping duties of 14.35%-87.99% and anti-subsidy taxes of 20.73%-100.77%, which together add up to a maximum tax rate of 188.76%. China is the world’s largest tire producer and exporter, with an annual output of about 630 million pieces, accounting for about 25% of the world's annual production, of which 40% is used for export. The "double reverse" ruling measures will bring three major impacts on my tire industry.
Transferring US tires to the "double reverse" case
First, the number of tires imported into the United States fell sharply. For a long time, the United States has always been China's largest export market for tires. China's passenger car and light truck tires are highly dependent on the US market, with the United States accounting for nearly 30% of the export share. In 2014, the amount of tire products imported into the US from the United States was US$2.3 billion, accounting for approximately 15% of China’s total tire exports. Since the United States initiated the "double reverse" investigation in June 2014, it has gradually affected the export of China's tires to the United States. From January to April 2015, China exported 21.26 million tires to the United States, which dropped 29.7% year-on-year. It is expected that the duration of the “double reverse†case in the United States will be longer than the 2009 special case for tires, and the tariff will also exceed the 35% tax rate for special security cases. This will lead to a complete loss of the price advantage of China's tire exports to the United States, thus losing the US market.
Second, the domestic tire industry is in turmoil. This final ruling has more than 200 tire companies involved in the “double reverse†US tires case involved. The amount involved is about US$3.37 billion. It is estimated that more than one million industrial workers will be affected by the upstream and downstream industries. The United States' "double reaction" has also caused the main export channels of domestic enterprises to be blocked, resulting in a sharp decline in the operating rate of enterprises. According to data from the China Rubber Industry Association, the operating rate of tire companies involved this year has suddenly dropped from the previous 90% to about 55%. With the final ruling of the "double reverse" case, the turmoil in the domestic tire industry will further intensify.
Third, triggered other countries and regions to follow suit. In recent years, China’s tire companies have become the focus of “double counter†investigations. So far, it has been successively investigated by the United States, Australia, Brazil and other countries in more than 10 countries, and Brazil, India, and Egypt have imposed anti-dumping duties on my tires. Since the United States launched the "double reverse" investigation on tires in June 2014, many countries have begun to imitate the United States. From July to September 2014 alone, Brazil, Russia, Belarus, Kazakhstan, Customs Union, Argentina launched anti-dumping investigations on tire products. On July 6, 2015, South African tire manufacturers also proposed to apply for the South African International Trade Management Committee to carry out an anti-dumping investigation against Chinese tires. With the final ruling of the “double reverse†case, it is easy to cause the above countries to further extend or increase countermeasures.
Recommendation: In the face of severe situation, domestic tire companies can seek breakthroughs in the following aspects: First, to further develop the domestic market. In 2014, the number of vehicles in China was 145 million units and the sales volume was 23.492 million units. It is conservatively predicted that the growth rate will be 5% in 2015 and 2016, and the domestic tire market has great potential for demand. The second is to adjust the trade layout. Leveraging on the “Belt and Road†strategy, we will do a good job in global investment, production and trade, and develop new markets. The third is to actively respond to trade frictions. Enterprises should prepare for long-term response, actively participate in defenses, and strive for favorable rulings.
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