Prices for washing machines and solar panels are likely to rise while tens of thousands of Americans could lose jobs following President Trump’s decision to slap hefty tariffs on imports of those products in a bid to aid U.S. manufacturers, industry officials say.
“It’s likely this will result in higher prices and fewer choices for consumers,” says John Taylor, senior vice president for LG Electronics, a South Korean maker of washing machines.
And Abigail Harper, CEO of the Solar Energy Industries Association (SEIA), a trade group, says the duties “will create a crisis in a part of our economy that has been thriving, which will ultimately cost thousands of hard-working, blue-collar Americans their jobs.”
The solar industry has been booming as system prices have become more competitive with standard electricity prices.
Yet some U.S. manufacturing advocates say worries about soaring prices are overblown and the administration’s gambit will ultimately create more jobs than it destroys as Trump moves to back up his “America First” credo..
“You’ll see more manufacturing workers in more states making more products with more innovation and R&D,” says Scott Paul, president of the Alliance for American Manufacturing, a trade group.
Trump approved recommendations by the U.S. Trade Representative to impose tariffs of up to 50% on imported large washing machines and parts, and up to 30% on solar panels. The tax on washing machines decreases and then expires after three years, while the duty on solar cells and modules phases out after four years.
The steps came after Whirlpool complained that Korean makers were dumping washing machines in the U.S. at excessively low prices from 2012 to 2016.
Meanwhile, solar makers Suniva and SolarWorld charged that China was providing unfair subsidies and financing to its solar producers during that period. China makes 71% of the world’s solar modules.
The U.S. International Trade Commission ruled in favor of the companies, concluding that the imports were “a substantial cause of serious injury” to U.S. manufacturers under a 1974 trade law. All of the petitioning companies have been losing money.
While the tariffs were largely aimed at South Korea and China, they’ll apply globally with a few exceptions, preventing companies from moving facilities to other countries to evade the penalties.
“The President’s action makes clear that he Trump administration will always defend American workers, farmers, ranchers and businesses in this regard,” U.S. Trade Representative Robert Lighthizer said in a statement.
But Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, says, “if you are an industry with a plausible complaint, come to Uncle Trump because he will take care of you.”
While the 30% tax on large washing machine will directly hit imports, Hufbauer estimates it will prod Whirlpool and other American producers to boost prices by a half to three-quarters of the 30% increase passed to consumers by their foreign competitors.
The tariff may already affect consumers who need a washer repaired since imported parts are also covered by the ruling. But some of the effects may be short term. Samsung is already making washers in South Carolina, and LG plans to open a new Tennessee plan by the end 2018 – offering possible avenues for skirting the tariffs.
It’s also not clear that most consumers who planned to buy LG and Samsung washing machines will switch to American suppliers.
“Considering the products are of good value, I am not sure if (a) marginal increase in prices, due to import duties, would be concerning the consumers,” says Dinesh Kithany, principal analyst of home appliances at IHS Technology.
Hufbauer says Whirpool and other domestic washing machine makers could add some jobs as a result of the new tariffs. But the SEIA says about 23,000 U.S. solar jobs will be lost because of the tax on solar imports. There were 38,000 solar manufacturing jobs in the U.S. at the end of 2016, but all but 2,000 made racking systems and products other than solar cells and panels.
Overall, most jobs losses in the solar industry will be among installers, says Amy Grace, head of North American research at Bloomberg New Energy Finance. Meanwhile, she doesn’t expect manufacturers to move facilities to the U.S. because the tariff lasts only four years. It’s also unlikely that customers will switch in large numbers to American producers because there isn’t enough capacity in the U.S. to meet strong demand, Grace says Less than 20% of U.S. solar demand is met by domestic manufacturers, SEIA says.
Paul, however, expects Suniva and SolarWorld to add jobs in the short term.
Many customers have been stockpiling systems in anticipation of the ruling, and so the bulk of the price impact likely will not be felt until 2019, Grace says.
Eventually, however, Grace expects solar system prices to rise about 10% for utilities and other large purchasers and about 3% for consumers. Installation and other costs make up a bigger portion of rooftop systems.
GTM Research estimates the tariff will reduce large solar installations by 10% to 15% through 2022.