TRUMP’S MISGUIDED TARIFFS
President Donald Trump’s pledge during the presidential campaign to help manufacturing workers by reducing imports from China and other countries sounded half-baked. His administration’s decision Monday to impose import tariffs on solar energy cells and panels and on washing machines makes clear just how difficult it will be to deliver on that promise.
The move will most likely raise the price of solar panels and washing machines in coming years and yet may not even lead to many more jobs. That outcome might sound paradoxical, but analysts say it’s due to changes underway in both industries well before Trump took office.
Tariffs will not be high enough to create new manufacturing jobs because the cost of production in countries like Malaysia and South Korea will remain significantly lower than in the United States. Also, U.S. factories would probably be highly automated and require far fewer workers. Meanwhile, the higher tariffs — and thus higher prices — for solar cells and panels will reduce demand from residential customers, businesses and utilities. That will hurt U.S. businesses that install panels and produce equipment used in solar systems. The Solar Energy Industries Association estimates that the tariffs could cost that industry 23,000 jobs.
Whirlpool, which sells more washing machines in the United States than any other company, says that the Trump administration’s decision, which will apply tariffs to imports from most countries, will lead to the creation of 200 jobs at a factory in Ohio, in anticipation of increased sales. But foreign appliance manufacturers like Samsung and LG have already built or are building factories for washing machines in the United States. So any advantage Whirlpool might enjoy could fade away as a new Samsung factory in South Carolina and an LG factory under construction in Clarksville, Tenn., begin churning out machines, creating more competition.
The Trump administration imposed the tariffs in response to complaints by domestic manufacturers — Suniva and Solar-World in the solar case and Whirlpool in the washing machine case — that competition from a surge of imports had hurt their businesses. The tariffs on solar products last four years starting at 30 percent, falling to 15 percent in the fourth year. Each year, the first 2.5 gigawatts of solar cells imported into the country will be exempt from the tariffs. The washing machine tariffs last three years and start at 20 percent on the first 1.2 million units and 50 percent for the rest, declining to 16 percent and 40 percent in the third year.
The tariffs, though, could have a domino effect. The Trump administration imposed them under a federal trade law that allows the president to protect, or “safeguard,” domestic industries hurt by imports. Other countries will very likely challenge these tariffs at the World Trade Organization and seek to impose retaliatory tariffs against U.S. exports.
Trump is hardly the first president to use tariffs to help domestic industries. Barack Obama and George W. Bush took similar actions to help the tire and steel businesses respectively. But those presidents also tried to strike trade agreements with other countries, with varying degrees of success.
Trump seems uninterested in the painstaking diplomacy and negotiation such agreements require. Just look at his threats in recent months to withdraw the United States from the 24-year-old North American Free Trade Agreement should Canada and Mexico not quickly agree to changes his administration is demanding.
The White House needs to put forward a coherent and convincing trade policy if Trump wants to do right by his working-class supporters. The current piecemeal approach is not working on behalf of U.S. consumers, nor is it likely to put anyone to work.