New Phase in "America First" Trade Policy

Heaven forbid consumers in the US get a break. Trump wants none of it.

I have idea. Let's raise prices and at the same time kill anything clean energy has going for it.

We call this policy "America First".

President Donald Trump slapped steep tariffs on imports of solar panels and washing machines, kicking off his second year in office by showing he’s ready to start implementing his long-promised tough “America First” trade policy.

“The president’s action makes clear again that the Trump administration will always defend American workers, farmers, ranchers, and businesses,” U.S. Trade Representative Robert Lighthizer said in a statement.

Specifically, the administration said it would impose tariffs on washing machines at a rate of up to 50%, with the rates phasing out over the next few years. The tariffs would be combined with quotas. Tariffs on solar modules would be as high as 30%, and be phased out over time.

The solar petition was filed by Suniva Inc. and SolarWorld Americas Inc., two embattled solar panel makers with operations in the U.S. that have filed for bankruptcy protection.

The washing machine petition was filed by Whirlpool Corp., which is locked in a tough competitive fight with Samsung Electronics Co. and LG Electronics Inc. of South Korea. Whirlpool’s stock rose 3% in after-hours trading in response to the move, which was announced after U.S. markets closed.

The actions drew criticism from free-market economists warning of new costs to consumers, and the dangers of trade wars. But it drew praise from some Democrats normally critical of the president, showing the potential of the new Trump trade policy to scramble the political landscape this year.

Blatant Tariff Stupidity

Trump's action is so blatantly ridiculous that it's hard to remain calm.

China wants to provide cheap solar panels, supposedly at a loss to the US.

Who Wins from Cheap Solar Panels?

  1. US consumers who buy the panels, allegedly subsidized by China
  2. US companies that install the panels
  3. US shipping and trucking companies that deliver the product
  4. Local fast food restaurants where the installers eat.
  5. Gasoline stations where the truckers and installers fill their tanks.
  6. Environment

Trade War Repercussions

Tariffs may save a handful of jobs at bankrupt US companies that cannot compete globally but it will be at the expense of all six of the above.

The same applies in a similar fashion to TVs, underwear, and washing machines.

China may retaliate by canceling orders from Boeing or reducing soybeans imports from US farmers.

It is not going to take much to prick various global economic bubbles. A trade war with China could do it.

True Source of Trade Imbalance

Few know the true source of the US trade imbalance with China and Mexico. I discuss the reasons here: Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?.

Mike "Mish" Shedlock

Comments (33)
No. 1-33
Brother
Brother

I believe it a race to the bottom on prices. Who in the US wants to get into any industry saturated with cheap labor. Distributors cut there margins.. but everyone is a distributor fitting for a few %...i would like to think some industries as protected ground.

killben
killben

Citizens (consumers, savers, retirees, prudent people) will always be the first to be asked to bend over by the politicians and regulators. Easy meat!

SweetKenny
SweetKenny

If you can’t compete in an industry, destroy your competition.

Greggg
Greggg

Observe a long battle of US vs Canada over milk and how it backfired. Last year, a gallon of whole milk retailed for about $2.84. Three days ago, a trip to the grocery store, we bought a gallon for $1.14. Changes in filtering technology and changes in US-Canada NAFTA are behind this. https://www.minnpost.com/politics-policy/2017/04/why-were-verge-trade-war-canada-yes-canada-over-milk-yes-milk

jivefive99
jivefive99

Germany and Japan protect their industrial sector like crazy, their workers are way better off than ours, and we are the dumping ground for every product the world can drop on us. What is wrong with this picture?

Vitos
Vitos

I'm glad that only two months ago, I replaced my leaking, error-code-throwing, mold-growing POS Whirlpool washer with a quality LG washer. It has a 10 year warranty and should outlast this tariff stupidity.

doraemon
doraemon

German japanese workers better off? In what ways. But their consumers are definitely worse off than us. Need proof? On rakuten japan, the samsung s8 phone sells for $750 up, on walmart its $650, unlocked

Sechel
Sechel

look at it this way, it will boost fossil fuel use

Wrldtrst
Wrldtrst

nothing matters... the buy side imbalance continues.

terex
terex

Mish, four questions for you: 1) Would you say that competition between companies as well as countries as far as possible should be fair? 2) And if so, when does unfairness (if ever) become a "big" enough problem to require action of sorts? 3) Who is most unfair in the grand competition of trade and finance (trade, investments, access, etc) between China and US? 4) And is this a small 'negligible' problem for the mistreated country or does it require action of sorts?

Sechel
Sechel

the solar tariffs were a back-door effort to support fossil fuels. Trump failed to get the electric utilities to pay a subsidy to coal producers so he effectively raised the price of solar panels. Doubt Trump thought of this, but some of his people may have. Insidious.

2banana
2banana

China and Korea have massive trade surpluses with the United States. Guess who is going to lose in a trade war. Trump is going to win again and pull a bunch of democrats to his side.

Realist
Realist

To assume that someone can “win” a trade war is equivalent to saying you can “win” a nuclear war. It’s closer to “who loses the least”.

Sechel
Sechel

@2banana. If China wants to sell the u.s. solar panels below cost we should buy the hell out of them and bankrupt them. in the long run lower energy prices will only make the u.s. more competitive and lower our energy costs.

Top-GUN
Top-GUN

#terex ... define unfair... I just read on Wolfstreet.com that Netflix is willing to sell me movies at a loss... I love it... I also love anybody else who wants to sell me something inexpensive, if they are doing it at a loss, fine with me,,, who am I to tell them what their business model should look like..

2banana
2banana

@Sechel. Do you really think this has anything to do with buying products below cost? You need to look at the big picture.

terex
terex

That is a good point, but in the case of Netflix there is a market (and therefore market prices) for financing (rightly or wrongly) its business. In the case of China there are political (formal and informal) subsidies of all sorts ..., and if you as a foreigner/foreign business want to take advantage of this beneficial situation locally in China you will very soon find out that you are not allowed to participate on same terms as locals anyway.

KidHorn
KidHorn

I had a whirlpool washer. It was a total POS. Threw it out after having it for 2 years, even though technically it still worked. Was constantly giving errors. Replaced it with a Samsung. The Samsung is much better. Put the clothes in, add detergent, turn it on and an hour later, it's done. With the whirlpool, I would have to restart the cycle 5 times before it completed. Shame on Samsung for selling a superior product for the same price. It's so unfair.

formula57
formula57

Trump acts in a long tradition for the USA enjoys numerous protections, not least from the Jones Act, which requires ships carrying goods from one U.S. port to another to be built in the United States, have U.S. owners and be mostly staffed by U.S. crews (to the likely detriment of Puerto Rico).

Sechel
Sechel

how does one reconcile the tariff actions and destruction of free trade agreements like NAFTA and TPP with the rising stock market. This makes zero sense to me.

Seb
Seb

That was my argument. Samsung and LG are so much better than American made whirlpool shit. So are their cars. And electronics. The only thing Americans still make better than anyone are guns and missles. Not boats or planes. Guns and missles. And believe me the rest of the world knows that. The gap between rich and poor is huge. It’s now getting to the point where the poor will no longer want money. They’ll want something far more valuable in their eyes. They’ll want justice.

DBG8489
DBG8489

The answer to all of this lies in the answer to one question: Why does it cost more to produce a product in the US than it does in China?

Many/most would say it's because the labor in China is basically slave labor - and in some rare cases, they would be correct. But in the majority of cases, they are not. Labor is cheaper - but just because they don't make the same wages as US workers doesn't mean they're slaves.

As long as the people and politicians of the US refuse to understand basic economics, and continue to listen to charlatans who tell them that you can print forever without consequence, they will continue to do stupid things like create and raise a "minimum wage" - or some sort of "living wage" or whatever they choose to call it. They will continue to enact more restrictive regulations, compliance, insurance, vacation, and licensing requirements. They will continue to allow public and private unions to dictate wages and pensions. And they will continue to treat business owners as if they "owe" something to the rest of us for providing us with a product or service we want...

As a result of all this, they will continue to drive the costs of production on pretty much everything in the country through the roof.

And of course those same people will then point to China, or Canada, or Mexico and say "SLAVE LABOR!!" or "GOVERNMENT SUBSIDIZED!!" and demand that tariffs be enacted to "save American jobs."

You want to save American jobs? You want to bring production back to the US? Get the hell out of the way.

Sandy K
Sandy K

"Trump's action is so blatantly stupid it's hard to remain calm."........thats it, the world has lost its mind......stupidity surrounds us with such intensity and regularity it takes effort to make sure one does not get sucked into its endless abyss. What would Hayek and Mises say today? Sometimes, one has to be ashamed of the living in a time, where society has lost its collective mind....

Snow_Dog
Snow_Dog

Canadians are now saying that the crisis is an unfortunate cost of the U.S. producing too much and getting too deep in the volatile export market.

“Let’s not pretend that we’re in a global free market when it comes to agriculture,” said Trudeau last week in Toronto. “The U.S. has a $400-million dairy surplus with Canada… So it's not Canada that is the challenge here.”

Massive overproduction in dairy already exists and the farmers want immigration waivers to put alien labor to work producing still more. Retail prices should be falling even more. Canada is using the system controls in a reasonable way.

Snow_Dog
Snow_Dog

“Let me be clear : I don’t support ethanol. I don’t believe the best thing we should be doing with our food supply is to burn it up as fuel for automobiles. As President, I will not support ongoing subsidies for ethanol production.”
~ Ted Cruz (R-TX) on the stump in 2016 in cornbelt state Iowa.

Traditionally the first state in the primary campaign, Ted Cruz won Iowa with such plain spokeness. He wants corn used as food. Crazy bastard, how does he expect to win that way?

RonJ
RonJ

“Let’s not pretend that we’re in a global free market when it comes to agriculture,” said Trudeau last week in Toronto. Let's not pretend we are in a global free market, period. A free market doesn't have trade agreements. There are no trade agreements between each of the 50 states.

AWC
AWC

First, tariffs, then a Works Progress Administration (Infrastructure Boondoggle) in an attempt to cover up the damage? FDR would be proud. New populist same as the old populist.

WildBull
WildBull

Those Solar companies aren't even US corporations.

Ambrose_Bierce
Ambrose_Bierce

This all goes back to the 80s when mainland China was (illegally) outsourcing shoe parts (made with prison labor) for Nike in Hong Kong. They couldn't stop it then, they can't stop it now. Now we are all part of the "worker bee" economy, including the crap jobs that will be returning to the US. Get a jump in inflation you will need one of those jobs just to make ends meet. Trump to the American Populist Movement: How do you like me now?

Realist
Realist

I see the TPP was finally settled today, and will be signed in March (minus the US of course). Hopefully that will help continue the growth in the global economy.

Kinuachdrach
Kinuachdrach

The only reason there is much of a market for solar panels is because of politically-driven subsidies -- same as for bird-whacker wind factories. Better answer would be to give the US taxpayer a break by removing all direct & indirect subsidies & mandates which drive the (full life cycle rather dirty) alternative energy businesses. Best policy internally is to cut regulation & taxes and encourage innovation. Best policy internationally is full reciprocity -- make it tough to import our stuff, and we will make it equally hard to import your stuff into the US. (Yes, I am talking to you, Japan). Except for Germany -- tired of those hypocrites selling over-priced collections of Polish parts assembled by Turkish workers into lumbering gas-guzzling battle-wagons. The German auto-manufacturers deserve special painful treatment -- to save the world from Global Warming, if you like,

Sechel
Sechel

maybe trump just feels more sympathy towards business owners than consumers. he spent his life trying to get people to spend more , not less for real estate.