Protectionists talk a big game about the ‘forgotten working man,’ but the results of tariffs on Chinese imports to the U.S. tell a different story.
“Truck chassis” is the name for the trailers that trucks use to carry shipping containers. The world’s largest producer of them is CIMC, a Chinese company. During the pandemic-era surge in demand for goods, the U.S. could have used more truck chassis, but the federal government imposed punitive tariffs on them to prevent their importation from China.
The protectionist logic was straightforward: Sure, Americans will have to pay higher prices for chassis, but they shouldn’t be made in China, and tariffs will level the playing field for U.S. chassis-makers who are faced with subsidized Chinese companies and allow them to be competitive, leading to more investment and hiring in America.
Protectionists got their way, and the U.S. implemented their preferred policy, at the request of U.S. chassis-makers. Tariffs and antidumping duties combine for a roughly 250 percent tax on Chinese chassis.
I wrote against it in November 2021. U.S. chassis-makers could not satisfy U.S. demand, and 2021 orders were not expected to be delivered until the second half of 2022. I checked back in during the second half of 2022, and U.S. chassis-makers were still behind on their orders and were having a hard time finding workers.
Now Bloomberg has a full story on two truck-chassis-manufacturing facilities. One of them, in Alabama, is for Pitts, one of the U.S. companies that asked for the tariffs on China. The other, in Virginia, is for CIE, the U.S. subsidiary of CIMC. They have both struggled under the tariff regime.
As I wrote in the 2021 article, CIMC had already decided to focus more on U.S. manufacturing of its chassis in 2016, before the tariffs were in place. The Virginia plant was already in operation and assembling 20 percent of CIE’s North American chassis in 2018, the year Trump’s China tariffs came into effect.
CIE was hurt by the 2019 increase in China tariffs from 10 percent to 25 percent, but it was still holding its own. That’s when U.S. producers, including Pitts, demanded antidumping duties on top of the tariffs. They won their case and got the combined tax rate raised to about 250 percent in 2021.
It turns out that Pitts wasn’t as domestic as it might have seemed. CIE discovered that Pitts was importing chassis from a Vietnamese company that it alleges was using materials from China. CIMC filed a complaint with the federal government saying Pitts’s Vietnamese chassis had enough Chinese components that they should also be subject to the tariffs. U.S. Customs agreed.
“Pitts, having just profited from protectionism, was suddenly paying a heavy price in its name,” the Bloomberg story says. Pitts disagrees with the Customs decision and is suing to have it reversed, but that didn’t change the outcome for the company’s finances: $250 million in expected revenue and a $15 million equipment upgrade both went out the window.
Pitts and U.S. manufacturers then filed another complaint with the federal government. They said that CIE’s plant in Thailand was covering up Chinese-made parts to avoid the tariffs. During the federal investigation, CIE would have had to pay tariffs in escrow, so instead it stopped importing the parts from Thailand. That meant it had to cut hours for its workers in Virginia, who no longer had enough parts to work at the previous levels of production.
The investigation dragged on until April of this year, when CIE was found not to have violated the tariff rules. “But the damage had been done,” the Bloomberg story says. “The company had laid off most of its Virginia workers in January. In June the Emporia plant ran out of frames to turn into chassis.”
Yet again, the costs of tariffs have swamped out potential benefits. This is a consistent finding of economic research. Not only that, the governmentalization of industry that comes with tariffs has turned U.S. chassis-makers into complaint-filers and lawsuit-makers, as they rationally calculate that their best profit opportunities are in getting the government to punish their competitors.
Protectionists talk a big game about the “forgotten working man,” but they forget about working men like Jarvis Hicks, featured in the Bloomberg story, who worked for CIE at the Virginia plant and had his hours cut in response to the tariff investigations. “I don’t like it, to be honest, because I’m used to working all day,” he said. And he probably would be, if not for tariffs.