Trump's New Tariffs Will Hurt the U.S.

(Bloomberg View) -- Invoking a 1974 law intended to safeguard companies from unfair competition, the Trump administration has announced new tariffs on foreign-made solar panels and washing machines. Both measures are deeply misguided.

At best, they will raise prices, threaten jobs, antagonize allies, encourage retaliation, and impede clean-energy development, all without offering any real benefits. At worst, they may herald a perilous new direction in American trade policy.

Panel manufacturers make up a shrinking fragment of the $28 billion solar industry. In trying to protect them, the administration is raising costs for U.S. businesses in far more promising areas -- such as installation and distribution -- which benefit from cheap imports. A trade group for the solar industry reckons the measure will cost 23,000 jobs and impede billions of dollars in investment.

Not incidentally, it will also make solar less competitive relative to fossil fuels. Cheap foreign-made panels are a key reason why solar has become the largest source of new electric capacity in the U.S. -- and why the industry is adding jobs 17 times as fast as the broader economy. Undercutting that business coheres with Trump's antediluvian energy agenda, but it makes little sense strategically or economically.

The new tariff on washing machines, meanwhile, may be a boon for Whirlpool Corp. But its likely effect on jobs in the industry is murkier, because the firm's South Korean competitors were anyway planning to expand production in the U.S. The clearest implication is for U.S. consumers: They'll end up paying more for their washing machines.

What's most ominous is that these measures could be just the start of a much bigger shift in U.S. trade policy. Even if that isn't the intention, other domestic manufacturers will be encouraged to crank up their demands for trade protection. The White House is already mulling new barriers to steel and aluminum imports, and may sanction China over intellectual-property rights. In all these cases, it is relying on arcane statutes intended to circumvent the normal trade-dispute rules, and in that way is putting the larger system at risk.

Invoking such measures has almost always harmed consumers, stunted growth and led to retaliation, while rarely helping the intended beneficiaries. Once, U.S. policymakers understood this -- and built the World Trade Organization to resolve such disputes in a way that promoted trade, jobs and living standards. A recent Bloomberg analysis found that the U.S. has prevailed in 86 percent of the cases it has brought there. If Trump has objections to foreign trade practices, that's how to address them.

The alternative is to endanger a system that has served the U.S. and its partners well for years. And the biggest losers will be the workers and consumers Trump claims to represent.

--Editors: Timothy Lavin, Clive Crook.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.

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