Beneath the Tariff Cloud: The Hidden Strain and Reshaping of the US Tyre Supply Chain

As the global economy gradually emerges from the pandemic's shadow, the sensitive nerves of supply chains are once again being jangled by tariff policies. For the US tyre market, the latest round of tariffs imposed on certain imported products undoubtedly serves as a stark warning. This is not merely about immediate price fluctuations; it represents a more profound shake-up of the industry's long-standing cost structures, brand segmentation, and distribution ecosystem, upon which it has relied for so long.

Tyres, being one of the automotive industry's components most reliant on global division of labour, have their manufacturing processes, raw material sourcing, capacity deployment, and market strategies deeply embedded within global supply networks. When policy barriers are suddenly erected, the market endures more than just short-term import-export turbulence; it confronts a systemic challenge of "localisation, substitution, and resilience rebuilding."

I. Price is Not the Whole Story: The Widening Mismatch in Costs and Structure

Within the industry, tariffs are perceived as a structural cost disruption. They don't simply inflate the price of overseas products; they dismantle the previously stable model of profit distribution. In the US tyre market, replacement tyres have consistently served as the "traffic gateway," the initial point of contact where consumers engage with brands and build loyalty. The profit margins for replacement tyres are already constrained by fierce competition. Once the costs of imported products rise, the price elasticity that local dealers can absorb is compressed, ultimately forming a vicious cycle of "high cost – low premium – weak profit."

Concurrently, brands' market positioning is being passively reshaped. Brands that previously relied on overseas mid-range capacity for cost optimisation are now forced to make difficult choices between "raising prices and losing competitiveness" or "compressing profit margins." This structural mismatch will cause some brands to lose ground in their price segments, falling out of their established competitive zones. While domestic brands may gain a relative price advantage, they too face the sustained upward pressure of raw material and labour costs, making it difficult to fully capitalise.

Differential Impact of Tariffs: Considerations Across Tyre Types

It is worth noting that the impact of tariffs varies across different segments of the tyre market. For instance, in the highly competitive passenger car and light truck replacement tyre market, where consumer price sensitivity is relatively high, tariff-induced cost increases are more likely to be directly passed on to end prices. This could spur consumers to seek more economical options or delay replacements, particularly hitting brands reliant on competitive pricing. According to 2023 data, passenger car tyre imports reached 165.22 million units³, representing the largest import category. For the medium and heavy-duty truck and bus radial (TBR) tyre market, while tariffs also increase import costs, users (primarily logistics companies and fleets) place greater emphasis on tyre lifespan, reliability, and cost per mile. Price sensitivity is comparatively lower. Tariffs in this segment translate more into rising operational costs, potentially affecting freight charges in the long run and prompting fleets to more actively pursue tyre retreading or adjust sourcing strategies. As an example from 2019, anti-subsidy duties on Chinese-made TBR tyres in the US ranged from 23.9% to 66.3%⁵. The specialty tyre market (such as those for construction machinery, agriculture, etc.), characterised by highly specialised products and a relatively concentrated supplier base, may see significant increases in operating costs for specific applications due to tariffs. Given the lower substitutability, related industries might find it harder to absorb these cost pressures. Thus, the "shadow" of tariffs is not uniformly cast but presents complex and asymmetrical effects based on the market characteristics, customer structures, and supply chain elasticity of different products.

II. Supply Chains Under Duress: Manufacturing Strategy Shifts Amidst Asymmetrical Deglobalisation

"Reshoring" is becoming a new buzzword in the US tyre industry. However, the actual path to implementation is far more complex than imagined.

Tyre manufacturing is an industry where capital intensity and process integration coexist. Establishing plants has long lead times, certification is complex, and capacity ramp-up curves are slow. In the current economic cycle, where sensitivity to cash flow is high, completely restarting or relocating manufacturing bases appears neither economically feasible nor realistic. Consequently, companies are increasingly looking towards "geopolitical substitution": setting up new plants or expanding existing capacity in neighbouring countries unaffected by tariffs, circumventing policy barriers through changes in country of origin. For example, in 2023, major sources of US tyre imports included Thailand ($3.55 billion), Mexico ($2.12 billion), and Canada ($1.7 billion)¹, reflecting the diversification of supply chains and reliance on North America and Southeast Asia. Notably, Chinese tyre imports into the US saw a significant 35% decrease in 2023³, while Thai tyre imports demonstrated strong growth, with passenger car tyre imports increasing by 19.6% year-on-year³. These shifts underscore the dynamic response to trade policies.

Yet, this is accompanied by new uncertainties. On one hand, non-traditional manufacturing countries often lack mature ecosystems in terms of raw materials, infrastructure, and skilled labour. On the other hand, the fragility of geopolitical landscapes could turn these "transit points" into the focus of the next round of policies. Businesses ultimately have to compromise between "policy certainty" and "supply chain reliability."

Perspective and Response of US Domestic Manufacturers

Nevertheless, under the "shadow" of tariffs, the sentiment among US domestic tyre manufacturers is perhaps more nuanced. On one hand, tariffs, by theoretically increasing the cost of imported products, should help narrow the price gap with overseas competitors (especially from lower-cost countries), offering them a relative advantage in the domestic market and potentially leading to improved capacity utilization. Some analyses also suggest that companies with a strong US manufacturing base may be better positioned than those heavily reliant on imports in the current environment. But on the other hand, domestic manufacturers also face challenges from fluctuating raw material costs, rising labour expenses, and global supply chain uncertainties. Furthermore, if tariffs lead to a contraction in overall demand for vehicles and replacement tyres, domestic manufacturers cannot remain unscathed. For instance, forecasts suggest that automotive tariffs could lead to a reduction of 1 million to 1.5 million in US annual vehicle sales⁶, directly impacting demand in the original equipment tyre market. Therefore, their strategy focuses more on strengthening their own "resilience," such as investing in upgrading US domestic plants to enhance efficiency and flexibility (like Michelin's upgrades to some facilities and Bridgestone's capacity optimisation), concentrating on high-performance, high-value-added products (e.g., tyres for electric vehicles, specific commercial vehicles, or the premium consumer segment), and optimising their distribution and service networks to differentiate themselves through technology and service rather than solely relying on price. Some domestic manufacturers may also leverage the opportunities presented by tariffs to re-evaluate their product lines and reduce their exposure to lower-margin products heavily impacted by tariffs.

III. Brand Stratification Reshuffled: Mid-Range Brands Face Dual Pressure

From a brand strategy perspective, the more profound impact will be concentrated on mid-range brands.

While low-price brands face cost pressures, their target consumers are highly price-sensitive, often giving them greater market resilience. High-end brands, conversely, rely on technology, performance, and safety as core value propositions, and price changes have limited impact on their loyal customer base. The truly awkward position is held by mid-range brands: they often depend on imports for cost advantages yet lack sufficient brand moats. Facing the dual pressure of rising import costs and high-end brands moving downmarket, they are highly susceptible to becoming vaguely positioned and marginalised.

Consequently, a brand battle centred on "repositioning" is quietly unfolding. Some brands are attempting to rebuild the brand experience through domestic contract manufacturing, upgrading after-sales service, and strengthening digital direct sales to shed the shackles of price tags. Others are choosing to focus on specific market segments (such as off-road tyres, eco-friendly tyres, EV-specific tyres) to break through with differentiation.

IV. Distribution Channels Under Strain: The Practical Test of Inventory Strategy and Cash Flow Management

The tyre distribution system has historically been dominated by regional distributors and local dealers, characterised by deep channel layers, price sensitivity, and slow inventory turnover. In the new policy environment, dealers universally face a dilemma: on one hand, stockpiling could lead to additional taxes and inventory depreciation risks; on the other hand, failing to stock up in anticipation of future price increases could lead to being passively sidelined during market shortages.

Simultaneously, issues such as extended supplier lead times, port congestion, and increased logistics costs are continuously squeezing operational efficiency at the channel level. For small and medium-sized dealers, cash flow tension is unprecedented. Some regions have begun to see a trend of "upward integration," with previously fragmented channels being consolidated and reorganised by large chains and e-commerce platforms, altering the mode of profit distribution.

V. The Future: Risk is Not the End, But the Starting Point for Reconstruction

While the current market situation may appear volatile and unpredictable, this upheaval, triggered by tariffs, might just inject an opportunity for the tyre industry to reshape its own structure and value chain.

Firstly, for manufacturing enterprises, this is a systemic thinking exercise to comprehensively review "cost composition - capacity layout - global policies." Secondly, for brands, the ability to break away from price logic and build a brand system supported by technology, sustainability, and safety performance will determine their survival boundary in the future market. Finally, for channels and service systems, digitisation, flattening, and service scenario integration may become core indicators of future competitiveness.

Against the backdrop of the global manufacturing landscape gradually shifting towards "asymmetrical deglobalisation," the tyre industry's vulnerability is forcing enterprises to transform towards a tripartite model of "diversified sources + brand resilience + supply chain elasticity." No single point is absolutely secure, nor can any country fully rely on a single source of supply anymore. The enterprises that truly possess "strategic autonomy" are perhaps those quietly building their foundations at this very moment.

References:

1. The Observatory of Economic Complexity (OEC) - Rubber Tires in United States:https://oec.world/profile/bilateral-product/rubber-tires/reporter/usa

2. (Specific tariff details are compiled from multiple news reports, e.g., on anti-dumping and countervailing duty rulings against China, India, South Korea, Thailand, Vietnam, etc. Specific rates are variable, hence a generalised description noting the variation is used.) For instance, TyreNews.co.uk - US tyre tariffs return: What Trump's 25% duty means for the industry:https://www.tyrenews.co.uk/news/us-tyre-tariffs-return-what-trumps-25-duty-means-for-the-industry(Mentions 25% tariffs and historical cases)

3. SunSirs - 2023 US Tire Import Market: Strong Performance of Thai Tires, Significant Decline in Chinese Tires:https://www.sunsirs.com/uk/detail_news-16968.html(Provides 2023 total import volume and data for passenger cars, China, and Thailand imports)

4. SunSirs - Tire Imports in the United States Increased by 22% Year-on-year in the First Quarter of 2024:https://www.sunsirs.com/uk/detail_news-18153.html(Provides 2024 Q1 import volume data)

5. IBISWorld - Tire Manufacturing in the US - Market Research Report (2014-2029):https://www.ibisworld.com/united-states/industry/tire-manufacturing/525/(Mentions tariffs on Chinese TBR tyres in 2019)

6. European Rubber Journal - Simmons: Tariffs to take significant toll on US tire market:https://www.european-rubber-journal.com/article/2097250/simmons-tariffs-to-take-significant-toll-on-us-tire-market(Mentions forecast decline in car sales)

7. (Strategies and developments of domestic manufacturers are compiled from multiple news sources, e.g., recent news reports on Goodyear, Michelin, Bridgestone.) For instance, Investing.com - Goodyear Tire a rare bright spot as tariffs roil markets:https://www.investing.com/news/stock-market-news/goodyear-tire-a-rare-bright-spot-as-tariffs-roil-markets-3965907(Mentions Goodyear's strategy); Manufacturing Dive - Michelin to lay off 1,400 employees, end tire production in Oklahoma:https://www.manufacturingdive.com/news/michelin-to-end-tire-production-at-oklahoma-plant-lay-off-1400/699586/(Mentions Michelin's capacity adjustments); PR Newswire - Bridgestone Unveils Two New Tires with ENLITEN Technology and its Advanced Digital Service Dispatch Solution at TMC 2025:https://www.prnewswire.com/news-releases/bridgestone-unveils-two-new-tyres-with-enliten-technology-and-its-advanced-digital-service-dispatch-solution-at-tmc-2025-302396528.html(Mentions Bridgestone's new products and technology)