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Global Supply Chain: Will US Tariffs on Solar Panels, Washing Machines Start New Trade War?

 

Unclear what Retaliatory Actions will be Taken by Other Countries, Net Impact on Manufacturing Jobs

Jan. 23, 2018
SCDigest Editorial Staff

After moves in 2017 to evaluate the impact of certain imported goods and trade practices on US manufacturers, the Trump administration this week announced a series of new duties on solar panels and washing machines coming into the US.

The impact of the news on all the players inside and outside the United States is far from clear, and the move raises the possibility of retaliatory measures that could create a trade war. Foreign governments might place retaliatory duties or tariffs on US exports, and the new duties might lead additional US manufacturers to seek protection from offshore competition.

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Trade issues also make strange political bedfellows. Ohio Senator Sherrod Brown, a Democrat from Ohio – location of the giant Whirlpool plant - sides with Trump on the duties.


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The new duties of course are part of a broader Trump-administration policy of reorienting trade rules in an attempt to boost US manufacturing employment. But if other countries make retaliatory moves, the overall effect on US manufacturing and jobs is far from clear and will take time to play out.

The US actions come at a time when protectionist measures across the globe are rising. Recent research coming out of the UK found that the world's top 60 economies have adopted more than 7,000 protectionist trade measures on a net basis since the financial crisis.

The solar trade protection - which applies to solar panels as well as cells, the piece of equipment that converts sunlight into electricity - is a 30% tariff in the first year, declining to 15% by a fourth year. The first 2.5 gigawatts of cells imported annually is exempt from the tariff.

On large residential washing machines, the Trump administration is imposing 20% tariffs on the first 1.2 million units annually, then 50% on those imported after that. It is also putting in place a 50% tariff on washer parts.

The impact of all this is complicated. On washing machines, for example, clearly Whirlpool – which filed the complaint with the US Trade Commission that led to the new duties – will see its competition from foreign manufacturers reduced. But so will China's Haier, which acquired GE's appliance business and its major appliance manufacturing operations in Louisville.

The move immediately spurred Whirlpool to announce that it had added 200 new full-time positions to a washer plant in Clyde, Ohio, to meet an expected boost in demand. The factory already employs more than 3,000 people.

But South Korea's Samsung stated that "This tariff is a tax on every consumer who wants to buy a washing machine. Everyone will pay more, with fewer choices."

Another South Korean appliance maker, LG, said the new duties could even lead to lower employment at its new factory in South Carolina due to the duties on imported washing machine parts.


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With regard to solar panels, 90% of those currently sold in the US are imported, primarily from China. The Solar Energy Industries Association forecast that the trade protections will cost 23,000 US jobs this year, and cause billions of dollars in solar investments to be delayed or canceled - because the higher costs for the panels will reduce demand for solar panel implementations.

However, some of the few companies still making cells in America expressed optimism relative to the new protections. Juergen Stein, chief executive of SolarWorld Americas, told the Wall Street Journal he was hopeful that the tariffs and quotas will be enough to "address the import surge and rebuild solar manufacturing in the United States."

At least one foreign manufacturer is also already looking to open facilities in the US. The unnamed company, which is billed as a "leading international manufacturer of solar panels and modules," approached city officials in Jacksonville, Fla. in early January about opening what it called its first manufacturing and assembly operation in the US, with a commitment to create up to 800 jobs by the end of 2019, according to records filed in the city.

Trade issues also make strange political bedfellows. Ohio Senator Sherrod Brown, a Democrat from Ohio – location of the giant Whirlpool plant - sides with Trump on the duties, saying "I applaud the administration for this strong relief."

Meanwhile, Nebraska GOP Sen. Ben Sasse said "Here's something Republicans used to understand: Tariffs are taxes on families."

There was strong pushback from the moves from leading exporters to the US. China's Commerce Ministry blasted the tariffs as an "abuse of trade remedy measures." The Mexican government said it will use "all legal resources at its disposal" in response.

In the end, it seems that these new duties on their own will a modest impact on global trade and US manufacturing. However, if they lead to retaliatory measures, and then additional responses from the US – perhaps spurred by further actions by other manufacturing industries – we could be headed into uncharted territory, at least in recent decades.

Are you for or against these moves to protect US manufacturers? Why or why not? How do you see this playing our? Let us know your thoughts at the Feedback section below.

 

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