Consumers pick up tab in trade row

US families saddled with higher prices from flawed China policies, forum told

From solar panels to washing machines and personal protective equipment, consumers in the United States are paying much more than they otherwise would have because of the country’s misguided policies on trade with China, an international trade expert said.

“The negative trade policies that the US has been imposing on China for the last couple of years have come back to bite us,” Jon Haveman, executive director at the National Economic Education Delegation, told a recent webinar hosted by the World Affairs Council of Northern California.

The trade policy has been generally in favor of protectionism for the past three and a half years, and it started off with imposing safeguards protecting US industries, including solar panels and washing machines, Haveman said.

The government alleged that other countries were selling those products in the US below cost, so the US needed to impose duties on those goods in order to prevent injury to domestic industries, he said.

As a result, the price for solar panels has increased, which means that “fewer people are going to be installing solar panels on their roofs, and that the solar panel installation industry really took it on the chin,” he told participants in the online forum.

In 2015, the residential price for solar panels was about $3.75 per watt and that was coming down pretty consistently until the tariffs were imposed, according to Haveman’s data. With the extra tariffs added, the prices jumped and stayed significantly higher than the pre-tariff level.

US consumers ended up paying $236.5 million more for solar panels than they otherwise would have, and they bought fewer panels and fewer people had them installed, Haveman said.

“So we may have protected the very limited solar panel production industry in the United States, but it came at great cost,” he said.

When tariffs were imposed on washing machines, the increase in the price of combined washing machines and dryers was greater than the size of the tariff — the price consumers paid for the package was about 125 percent of the tariff, according to Haveman.

That means a lot of benefit that the consumers could have gotten from buying washing machines was taken away from them by the government in the form of tariff revenue, he said.

“Our president made a big deal about how the Chinese would be paying the tariffs, but that turned out to just not be the case, because it was paid entirely by American consumers,” he said, referring to the impact of the policies by the US administration.

Hurting industries

Beginning in 2018, the US imposed multiple rounds of tariffs on virtually all goods from China: the first round on about $34 billion worth of Chinese imports, the second round on products worth $16 billion, and the third round on products valued at $200 billion.

The trade row increased US tariffs on Chinese goods by an average of 8.5 percent up to 12.4 percent, which is “essentially a tax on our consumption of Chinese goods in the amount of 12.4 percent”, Haveman said.

He also said that the tariffs on Chinese steel and aluminum did not do all that much to help the steel and aluminum processing industry in the US. Instead, it hurt all those industries in the US that use steel and aluminum as the price of their inputs went up.

“There’s no such thing as a free lunch. Tariffs may create jobs here, but they will also take jobs away over there,” he said. “Employment is determined by a wide variety of other things that have nothing to do with trade.”

As to the basis for starting the trade conflict with China, Haveman said the US administration has been completely misguided. The trade deficit is not driven primarily by trade and goods, but largely by the US federal budget deficit, he said.

“We may have reduced our trade deficit with China a little bit. But we did it at the expense of reduced exports. We did it at the expense of higher prices for consumers, higher prices for producers,” he said.