In Support of Chinese Tires Tariff

Ordinarily I would not be in favor of the significant tariffs recently supported by President Obama against the import of Chinese tires. Indeed, the argument that this 'saves American jobs'is for the most part, hogwash. It helps the American tire mfg. industry for sure but as anyone that's taken an intro macro course knows, the affects on the aggregate economy is just shifting resources from one group to another (in presumably inefficient fashion).

However, there is a legitimate argument, given the well known fact that Chinese imported tires are UNSAFE. Google chinese tires and you will find a plethora of links about recalls of Chinese tires by various States and by their own government. There is a reason their tires are so cheap, and the reason (which is the same reason why many of their products are so cheap) is because the Chinese cut safety corners in order to beat the market.

So, this tariff in this case in reality is simply a Pigou tax on a negative externality: the higher probability of lack of safety being passed on to consumers. The Chinese are not internalizing this cost, and consumers often are unaware the tires are safe at the time of purchase. So, I applaud the Obama administration for sending a signal to the Chinese, and for course-correcting a likely market failure.

I await Prof. Greg Mankiw's approval as well, since he's in bed with Pigou taxation.