On Tuesday, January 22, President Donald Trump announced the imposition of a 30 percent tariff on imported solar panels and a 20 percent tariffs on washing machines. Section 201 of the Trade Act of 1974 allows the president to issue duties when an imported product becomes “substantial cause of serious injury” to the corresponding domestic industry. Just so,Trade Representative Robert Lighthizer argued 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 U.S. counterparts, just as the U.S. does for its domestic industries. But government aid hurts companies in the long run by discouraging them from adapting and innovating.
The administration would prefer that the media interpret the move as a response to China’s unfair trade practices. Trump 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 its 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. Although in 2011 China was far and away the top exporter of solar cell and module components to the United States, in 2017 China 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 up the great majority of washing machines imported into the United States—this per Lighthizer’s own fact sheet. 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 U.S. in an effort to get around the tariffs, and (b) give American companies enough breathing room to expand enterprises and hire more workers. Both of these may happen. Already Whirlpool 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 some industries located in politically important places—they may create a few photo-ops at ribbon-cutting ceremonies—but they’ll eventually hurt other U.S. industries in ways no one can expect.
Some free-market conservatives may shrug 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 these protections 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.
But don’t pity 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.
