Select Page

Are the Trump Tariffs Good for the US Economy?

by Jan 25, 2018

It’s official—President Trump is a protectionist. Despite the fact that many (myself included) expected him to eventually walk back his campaign rhetoric about trade, the president has proven he’s serious about protecting American manufacturers.

On January 22, US Trade Representative Robert Lighthizer announced the country would impose a 30% tariff on all imported solar panels. The tariff will come into effect immediately and operate on a descending scale, falling from 30% in the first year to 15% by the fourth year.

While the new tariff will apply to imported panels from all countries, the largest proportion of imports come from China. Naturally, many see it as a move against Beijing.

Lighthizer specifically mentions China in the announcement, citing the fact that it subsidizes its own producers to give them a leg up on the global market. For that reason, the US is entirely justified in protecting domestic producers from competition.

President Trump took a softer tone, however, telling reporters “there won’t be a trade war” between the US and China.

What the president did do, was frame the policy as part of his administration’s broader effort to revive America’s manufacturing sector:

“Our action today helps to create jobs in America for Americans. We’ll be making solar products now much more so in the United States. Our companies have been decimated, and those companies are going to be coming back strong.”

Trump Tariffs Will Have Mixed Results

The new policy will have a number of effects, and not all of them will be positive. Overall, the solar panel industry employs about 260,000 workers in the US—but fewer than 20% of them are in manufacturing.

Panels will become more expensive, at least in the short term. And because panels will become more expensive, the workers who install them might suffer—if higher prices lead to diminished demand, it’s only natural that some of the men and women who install panels will need to find work elsewhere. At least that’s the opinion of the Solar Energy Industries Association (SEIA), which predicts the policy will harm more American workers than it helps.

The third effect, and the one President Trump and the Trade Representative are banking on, is that domestic producers will get a boost, allowing them to increase production and hire more workers. There are currently 14 solar panel and module manufacturers based in the US—many of which have struggled in recent years due to vicious price competition. The new tariff might give them the shot in the arm they desperately need.

While the president was signing the order to increase tariffs, Mission Solar Energy announced it was hiring 50 new employees and moving to a 24/7 production schedule, saying it was only “the first phase in the plan for production increase.”

SolarWorld, another producer, commissioned an analysis in 2017 that predicted tariffs could lead to the creation of 144,300 new solar jobs over the next five years, including 45,000 in manufacturing. While those figures are probably exaggerated, they clearly think higher tariffs would allow them to hire more workers.

Washing Machines Also Impacted

Lighthizer also announced the US would impose new tariffs on imported washing machines, citing a number of cases in which domestic producers filed grievances against foreign firms for dumping their products on the US market.

In the first year, tariffs will range from 20% to 50% depending on the number of washers imported—dropping to 16% and 40% by the third year.

The washing machine tariff is not viewed as directed against China, as South Korea and Mexico are the largest international competitors in the field.

Whirlpool (WHR) already seems to have benefitted from the tariff announcement. Its stock price rose by 9.5% over January 22-24, now trading at $182.63.