On January 22, President Trump announced the imposition of a 30 percent tariff on imported solar panels and a 20 percent tariff on imported washing machines. The Trade Act of 1974 allows the president to impose duties when an imported product becomes “substantial cause of serious injury” to the corresponding domestic industry. And there was U.S. trade representative Robert Lighthizer arguing that “increased foreign imports of washers and solar cells and modules are a substantial cause of serious injury to domestic manufacturers.”
Another word for “substantial cause of serious injury” is “competition.” It’s true that foreign countries subsidize their industries deliberately in order to undercut their foreign counterparts, just as we do for some domestic industries. But government aid hurts companies in the long run, discouraging them from adapting and innovating.
The Trump administration would prefer that the media interpret the move as a response to China’s unfair trade practices. The president singled out China for criticism many times during the 2016 campaign, and both he and Lighthizer referred to China in their respective statements on the tariffs. The media did their part, too, with numerous stories about the solar tariffs being a possible precursor to a trade war with China.
But these measures aren’t aimed primarily at China. In 2011, China was far and away the top exporter of solar cell and module components to the United States. In 2017, it had dropped to No. 4—behind Malaysia, South Korea, and Vietnam. That was the result of countervailing and anti-dumping duties imposed on the industry in 2013. In other words: We already took action against China; now we’re mainly punishing our friends. As for the new duties on washing machines, the South Korean companies LG and Samsung make the great majority of washing machines imported into the United States. This is hardly the most politic way to treat our chief ally in what’s surely the globe’s most dangerous diplomatic hot spot—the Korean peninsula.
The president no doubt believes that measures like this will (a) force foreign manufacturers to move some of their production lines to the United States in an effort to get around the tariffs, and (b) give American companies enough breathing room to hire more workers. Both of these may happen. Whirlpool already announced it would add 200 jobs at one of its Ohio factories. But we can expect China, South Korea, Singapore, and others to respond with protectionist policies of their own. Tariffs may temporarily help a company located in a politically important place—they may create a few photo-ops at ribbon-cutting ceremonies—but they’ll eventually hurt other U.S. companies in ways no one can expect.
Some free-market conservatives shrugged off the tariffs on solar panels. The green-energy industry, after all, is already the recipient of a dizzying array of state and federal tax favors and handouts; a 30 percent tariff serves it right. We sympathize, but such protection will only encourage policymakers to push for more and stronger favors to counterbalance the tariffs. Indeed, green-energy advocacy groups are already using the tariffs (which, remember, protect domestic solar-panel manufacturers) as an argument for yet more protections. Expect these tariffs to serve as an excuse to expand green-energy tax credits.
As for the solar-panel and appliance companies, they’ll simply pass along the cost to the consumers—who always end up paying for it when politicians play the hero.
