President Trump ran as a skeptic of free trade. That made many conservatives skeptical of him.
But then, he became president, and his first year was not marked by the onslaught of protectionism that many people had feared. In fact, if you can look beyond the silly daily controversies and the process stories and the boorish provocations on social media, conservatives have had a lot to cheer them about this presidency, particularly on the economy.
Trump’s erstwhile conservative detractors were showing signs of hopeful reassessment. Unfortunately, this week has brought a setback for those who dared hope that Trump would recognize that tariffs and other protectionist measures cannot be used effectively to beat an economy into shape.
The Trump administration took two new and very harmful actions that will, sadly, scale back some of the benefits consumers reap from the tax reform bill signed just before Christmas, the president’s biggest achievement so far.
First, he imposed a punitive tariff against two of the most popular brand manufacturers of washing machines. LG and Samsung are being punished, not in response to complaints from consumers, who have watched prices plummet and quality increase in a free market, but in response to a complaint from Whirlpool, a domestic competitor.
Whirlpool, the industry leader and a $21 billion company, has lost market share in washing machines over the past decade to foreign competitors whose products are arguably better. Whirlpool has continued to lose market share despite tariffs imposed in 2012 against washing machines made in South Korea and Mexico. This is why it filed its complaint against LG and Samsung. In response to those tariffs, the two South Korean companies did the rational thing and began manufacturing their washers in countries such as Thailand and Vietnam, where the tariffs don’t apply.
You should be pleased with Trump’s protectionist move only if you are looking forward to paying more for your next washing machine. Just don’t expect it to revive domestic manufacturing or create more jobs.
Trump’s second big anti-trade action this week involves solar panels. Over the past decade, over-subsidization of solar panels by Western governments depressed prices, forcing most Western manufacturers out of business. But cheap foreign solar panels are readily available, so American installers and manufacturers of solar accessories, such as the racks that go on your roof, have grown into a thriving industry, employing 260,000 American workers installing solar panels that are 95 percent foreign-made.
Now, this industry may not last much longer. Two bankrupt American solar panel makers, who may not even try to re-enter the industry, filed a complaint to secure tariffs against foreign solar manufacturers. They won their complaint, and Trump has just granted their desired tariffs. The domestic solar industry, which opposes the tariffs, estimates that it stands to lose 88,000 jobs as a result.
Protectionism doesn’t work. That’s usually because, as with Whirlpool, it’s just a fancy name for an official policy of letting one company plunder its competitors. Protectionism is even worse when, as in the case of the solar tariffs, there are no American manufacturers to protect. In both cases, buyers will lose.
It’s a good thing you’ll be paying less in taxes this year and so have more money in your pocket. But it’s a shame you might need that extra money just be able to afford to buy a washing machine or solar panel that Trump’s protectionism has just made more expensive.
