THE IMPACT OF TARIFFS 1
Tariffs and Their Impact on the Global Economy
Kaelyn Ralph
The University of Texas at San Antonio
FIN 3313-001
Professor Les Doss
THE IMPACT OF TARIFFS 2
Abstract
A tariff is a tax to be paid on a specific class of imports or exports. This paper will primarily
focus on the impact of the tariffs imposed by the Obama administration and observe how this
affected the Chinese and United States economy. We will also discuss the impact on global
markets such as stocks, bonds, and overall money supply and determine if the decision of
imposing tariffs on Chinese tires was successful. We will look at how this has changed since the
Trump administration has taken control and compare views from economists, politicians, and the
industry as a whole on his decision to put tariffs on steel and aluminum as opposed to Obama’s
tires. By the end of this paper, we will be able to see the key differences in the decisions between
both presidencies and determine which one is more successful than the other. We will also be
able to fully understand and forge an opinion on tariffs regarding foreign country products and
U.S products.
Keywords: Obama, tariff, Trump, China, United States, economy
THE IMPACT OF TARIFFS 3
Tariffs and Their Impact on the Global Economy
A tariff is simply a tax. This adds to the cost of imported goods and is an available trade
policy that can be passed by any country. These are primarily used to provide security and
protect developing economies but are also used for stronger economies. Many people believe
that Obama’s tariffs on Chinese tires hurt Americans immensely but some people think that
Trump’s tariffs on steel and aluminum will harm Americans more. Taking a deeper look into the
reasoning and outcome of these decisions will help us form an opinion on which decision was
best for our country.
The Impact of Obama’s Tariff on the U.S. Economy
Former President Obama enacted an enormous tariff increase on Chinese tires in 2009.
The tariff grew to be 35% for a year, 30% for a second year, and 25% for a third year in addition
to the 4% that was already imposed on Chinese tires (Swanson 2009). Many people, particularly
the low income Americans, felt that this was a heavily prejudiced decision and that low income
American families were not factors to be considered. This tariff caused an increase in lower-end
tire prices from 20% to 30% (Griswold 2009).
This tariff was strongly advised against by several tire manufacturing companies such as
Goodyear, the Chinese government, and other importers. Some Americans saw this as our former
president bowing down to a union and ignoring the interests of the millions of other working
Americans and consumers, especially lower-income families (Swanson 2009).
Lower income families that had already been struggling to keep their cars were greatly
affected and would most likely not be able to afford the new tires and put themselves and their
families at risk having to put buying new tires on hold. The Car Allowance Rebate System
(CARS) forced the disposal of hundreds of thousands of cars and trucks that were traded in. This
THE IMPACT OF TARIFFS 4
reduced the supply of cars while the demand stayed the same, and this in turn raised the prices of
used vehicles for those of lower income and even middle class families that could not afford to
buy new vehicles.
However, there were some positives. The tariff on Chinese tires saved over 1,000 jobs
and U.S tire production rose. The tariff may have been beneficial to tire manufacturers but other
studies show that there were thousands of retail jobs lost, Americans paid more for tires since the
lack of competition pushed up prices, and the Chinese fought back with penalties on U.S
shipments.
The Impact of Obama’s Tariff on the Chinese Economy.
Since the increase of the tariff on Chinese tires, U.S tire companies and dealerships did not want