This article was published by The McAlvany Intelligence Advisor on Wednesday, January 24, 2018:
It would seem so. Following Monday’s announcement by President Trump that tariffs of between 30 and 50 percent would immediately apply to imported solar panels from China and washing machines from South Korea, U.S. Trade Representative Robert Lighthizer rejoiced: “The president’s action makes clear again that the Trump administration will always defend American workers, farmers, ranches, and businesses.” This view was confirmed by a White House trade official who told reporters:
If you look at solar closely, you have a clear example of Chinese trade policy propping up an industry, creating excess capacity in an industry [causing] significant harm to the United States and globally as well.
He then declared ominously that this was just the opening salvo in the coming trade war:
We need to figure out how to deal with that, not just for the solar industry but for a lot of different industries where you’re going to see the same playbook trotted out.
This is the progressive playbook that Trump and his advisors have bought: that one of the purposes of the central government is to protect its industries from foreign competition. Especially if that foreign competition is “unfair” – i.e., being subsidized by a government. Then, for some reason, that becomes unfair, even if such subsidies result in huge savings for the American consumer. Some free market economists consider such foreign subsidies as a “gift” to the American consumer.
It was during the progressive Woodrow Wilson administration that that progressive mantra became part of the American political landscape. In 1916, the U.S. Tariff Commission was established to “oversee” trade relations between American companies and their foreign competitors. With passage of the Trade Act of 1974 it became the U.S. International Trade Commission (USITC) and began meddling in areas where it didn’t belong with a vengeance.
Two solar panel companies in the United States, thanks to that “unfair” foreign competition, were forced to declare bankruptcy in March 2017. A month later, they (Suniva and SolarWorld) complained to the USITC and they were joined shortly thereafter by Whirlpool. Whirlpool was unhappy about South Korea’s support of LG, and also sought relief. In September the commission ruled unanimously in favor of the complainants and recommended to the White House various retaliatory measures be instituted to “level the playing field.”
The immediate effect is likely to be muted. Prices for solar panels and washing machines will start to rise thanks to the removal of price competition from abroad. There will be little incentive to keep costs down or invest in improvements. As prices rise, demand will soften as fewer American consumers will buy them. This will result in fewer workers in those industries, with some estimates approaching 25,000 jobs to be lost over the next few years.
Historians are warning that this opening shot could portend something vastly more serious. They remember the Smoot-Hawley Tariff Act of 1930, which placed tariffs on more than 20,000 imported products as the Roosevelt administration soothed its listeners with promises of protecting American jobs and industries. Within months, America’s primary trading partner Canada unleashed its own retaliatory tariffs, and the Great Depression was on.
The president is playing with fire, especially as these tariffs are only the beginning of the implementation of the progressive, interventionist “playbook.” Once the door to tariffs and quotas is opened, soon to follow will be administrative barriers, anti-dumping legislation, direct subsidies to American companies suffering from foreign competition, export subsidies, and the imposition onto the American people demands that they “buy American.”
In his effort to put “America First” Trump is putting the American consumer last, and opening a door that he might later wish that he hadn’t.
Background on protectionism in the US
The Wall Street Journal: Targets of Trump Tariffs Say U.S. Consumers Will Get Pinched
The Wall Street Journal: U.S. Imposes New Tariffs, Ramping Up ‘America First’ Trade Policy
History of Smoot-Hawley Tariff Act of 1930