President Trump has been the biggest advocate of protectionism to occupy the White House since Herbert Hoover, who signed a notorious tariff-raising law in 1930 that deepened the Great Depression. So far, though, the Trump administration has taken a limited, more conventional approach to trade imbalances, using tariffs only to raise the cost of imported materials and products that were allegedly being dumped into United States at below-cost prices.
Now, an independent federal agency that adjudicates trade disputes is urging Trump to broaden the shield that the U.S. already provides domestic solar panel manufacturers against unfair foreign competitors. Dusting off a little-enforced provision in federal law, the International Trade Commission on Tuesday called for the imposition of temporary emergency tariffs of up to 35% on foreign-made solar panels and modules, with no need for proof of dumping or subsidies, in order to give two U.S. companies time to adapt to a surge in imports. The commission is also moving to give appliance maker Whirlpool similar protection against foreign-made washing machines.
It’s easy to be sympathetic to the plight of the two solar-power manufacturers, Suniva and Solar World. Competition from Asian companies manufacturing lower-priced products has driven dozens of U.S. companies out of business in recent years, and not necessarily for good reason — the United States has penalized Chinese- and Taiwanese-based solar panel manufacturers for using government subsidies and below-cost pricing to boost sales, and the Obama administration brought criminal charges against Chinese military hackers for allegedly stealing trade secrets from Solar World and other U.S. firms. Suniva and Solar World are the two biggest remaining U.S. producers of a technology that the United States invented, and Suniva is in bankruptcy.
Yet if Trump does impose tariffs that raise the price of solar panels and modules, the penalty will ultimately be paid by Americans who convert to solar power. Worse, it could make solar power uneconomic for at least some of those people who might have bought panels for their homes or businesses, hurting installers and the rest of the industry that surrounds solar power. Not only are there more jobs at risk in those companies than there are at Suniva and Solar World, but the U.S. has a strong environmental and strategic interest in shifting to solar power.
Beyond that, temporary tariffs won’t eliminate the advantages that many foreign manufacturers have, including low wages, minimal regulation and state subsidies. Those are the sorts of issues the United States tried to address through the Trans-Pacific Partnership that Trump abandoned. Instead, tariffs invariably invite reprisals against other U.S. industries’ exports, turning them into collateral damage.
It’s true that tariffs can lead a foreign competitor to shift manufacturing to the United States. But if that happens, it won’t help Suniva, Solar World or laid-off workers unable or unwilling to move to wherever the new factories locate.
The better, albeit harder, course is to use trade deals to attack the systemic problems that tilt the playing field against U.S. companies. Meanwhile, policymakers have to do a much better job of equipping current and future generations of U.S. workers with the skills they need to fill the jobs being created now. From that perspective, a four-year tariff may seem like a much simpler way to rescue an embattled U.S. industry. But it’s no real fix, and the costs are higher than the benefits.