Retaliatory tariffs rarely, if ever, work. That’s been proven time and again. When President Barack Obama tried that approach with Chinese-made tires during his first term, the results were predictable — a slight increase in domestic tire production and perhaps hundreds of jobs saved or created after the tariff was implemented in September 2009 but at an enormous cost to U.S. consumers in the neighborhood of $1.1 billion as well as a counter-attack by China, which slapped a costly tariff on U.S. poultry imports. According to one economic analysis, U.S. consumers essentially paid $900,000 per tire manufacturing job.
That’s why President Donald Trump’s decision last week to slap a pricey tariff on imported solar panels and washing machines is almost certain to produce a similar result. Prices for U.S. consumers are bound to increase, and that will cost far more U.S. jobs than they could possible create; companies that install solar panels have already warned the layoffs are likely to run in the thousands. And that’s without even knowing what China, the biggest solar panel exporter, may do in response to the decision.
Admittedly, the claim that Chinese firms have been able to capture the solar panel market because their own government has subsidized their efforts is not without merit. The U.S. International Trade Commission recommended the tariff in response to a petition filed by Suniva Inc., which manufactures photovoltaics in Norcross, Ga. (and, ironically, is a U.S. subsidiary of a Chinese company). More telling, however, is that the tariff was not supported by the bulk of U.S.-based solar energy employers who recognized that the trade-off — preserving possibly hundreds of jobs at a cost of thousands of U.S. jobs — just did not make sense.
In a statement, The Solar Energy Industries Association estimated that U.S. employers stood to shed 23,000 jobs from the tariff and concluded that it won’t keep Suniva or another company that joined the complaint, SolarWorld Americas of Hillsboro, Ore., (a subsidiary of a German company) afloat anyway. Instead, “They will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs,” according to Abigail Ross Hopper, SEIA’s president and CEO.
One has to wonder if Mr. Trump would have been so quick to discard these well-paying jobs if they originated in the fossil fuel energy sector, particularly the coal industry which has fewer than 55,000 full-time employees nationwide and experienced only modest growth last year despite the Trump administration’s elaborate efforts on its behalf. If the president’s decision to withdraw from the Paris Climate Agreement demonstrated a serious lack of understanding of climate change and the threat that rising sea levels and other harmful effects that global warming poses to the U.S. and other countries, the solar tariff confirms his aversion not only to climate science but to basic economics as well. The more you tax something, the less you get of it, and that includes clean, renewable energy.
While it was nice to hear some Republican senators decry the tariffs in recent days and recognize the foolhardiness of the president’s “America First” rhetoric that actually puts American jobs last, one has to wonder: Why aren’t more in the GOP upset about this? Historically, it’s been Democrats who support protectionist trade practices. And, of course, this isn’t the only opportunity for President Trump to involve the U.S. in a trade war. The fate of the North American Free Trade Agreement remains up in the air despite a sixth round of negotiations this week in Montreal.
President Trump inherited a bull market, and it’s had a nice run during his first 12 months in office, but a full-blown trade war could reverse those circumstances quickly. South Korean-based LG has already promised to increase washing machine prices in response to the new tariffs. Throw in a withdrawal from NAFTA or a Chinese counter-punch to the solar decision, and the outlook for U.S. growth above 3 percent could fall off the proverbial negotiating table. It’s one thing for Mr. Trump to bluster away about unfair trade deals at his political rallies, it’s quite another to confront the reality of big tariffs, their resulting large price hikes and ultimately, lost jobs.
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