A North Carolina Goodyear Plant Is the Latest Victim of Trump's Misguided Tariffs and Costly Iran War
· Reason
Rather than ushering in a "Golden Age," President Donald Trump's tariffs and his war with Iran seem to have played a significant role in killing a North Carolina tire factory.
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The Goodyear Rubber and Tire Co. announced this week that it would be shuttering its Fayetteville, North Carolina, plant that currently employs more than 1,700 workers. The decision to close the plant was made to "strengthen Goodyear's ability to compete in today's marketplace and support the long‑term health of the business," a company executive told City View, a Fayetteville-based news and lifestyle magazine.
Translating that P.R.-speak is a bit easier when you look at what company executives have been telling investors.
Goodyear lost $249 million during the first three months of the year—after earning a $115 million profit during the same three months last year, just prior to Trump's tariffs being announced. Along with that announcement, CEO Mark Stewart said that "higher raw material costs" due to the war would force Goodyear to take "meaningful actions to strengthen our cost structure."
The 1,700 employees in Fayetteville would appear to be on the receiving end of that action—and for them, it certainly will be meaningful.
Tariffs have been another significant blow for Goodyear. The company said that it expected to receive $46 million in refunds after the Supreme Court ruled Trump's sweeping "emergency" tariffs to be unlawful. Even with that refund, inflation and tariffs would contribute to economic headwinds that could total $420 million over the full year, said Christina Zamarro, Goodyear's CFO, on an earnings call last week.
The big problem facing Goodyear is something that cuts right to the heart of the Trump administration's flawed view of global trade.
Simply put: you can't make tires without rubber, and it is impossible to buy rubber that isn't imported—because rubber trees do not grow in the United States. (Unless you count the one at the U.S. Botanic Garden in D.C., but that's probably not going to produce enough rubber to supply Goodyear's needs.)
That means American tire companies import rubber from places like Thailand, which has a climate well-suited to growing rubber trees and produces a lot more rubber than its domestic industries can consume. Naturally, Thailand exports a lot of that excess rubber to other parts of the world, including the United States.
However, the Trump administration sees other countries with a surplus of rubber production as a threat to be targeted with tariffs. In March, the Office of the U.S. Trade Representative claimed that Thailand's "trade surplus in sectors such as…rubber" was grounds for slapping higher tariffs on those imports.
That makes very little economic sense.
"Tariffs on natural rubber, no matter how high, won't bring rubber-tree plantation jobs to Minnesota or North Carolina, but will raise costs and reduce sales for every U.S. manufacturer of airplane and truck tires, vibration dampers in bridges, specialized medical equipment, and so on," wrote Ed Gresser, a former assistant U.S. Trade Representative, in a prescient piece published earlier this week by the Progressive Policy Institute, where he is a vice president.
Every tire Goodyear makes in the United States is dependent on imported raw materials. Many other American manufacturers are in the same situation, which is one reason why more than half of all imports to the U.S. are raw materials or intermediate goods.
After Trump's tariffs were announced last year, trade publications like Rubber World warned that consumers would face higher prices on both foreign-made and American-made tires. "While domestic tire producers might see a slight net benefit from reduced competition, they are also facing tariffs on the import of raw materials like rubber," Rubber World explained. "This dual impact could lead to increased production costs and supply chain disruptions, further complicating the market dynamics."
In other words, it is exactly what Goodyear is now experiencing—except with the added problems caused by a war that's further disrupting crucial supply chains.
Tariffs are not going to create a fully American-made tire any more successfully than they will create American-grown bananas or cocoa beans. But, by taxing imports and disrupting international trade (whether with tariffs or with war), the Trump administration is making it more difficult for American manufacturers to compete on the global market.
The debates about tariffs have taken place on the campaign trail, on Twitter, and in articles like this one. But it is in places like Fayetteville where the, well, rubber hits the road.
The post A North Carolina Goodyear Plant Is the Latest Victim of Trump's Misguided Tariffs and Costly Iran War appeared first on Reason.com.