While President Donald Trump’s tax cuts and deregulatory policies create conditions for more economic growth, his penchant for protectionism works to impede it.
Recently, he approved new tariffs on solar panels and washing machines. For the former, a 30 percent tariff has been set. Tariffs for the latter will be raised to 20 percent on 1.2 million units in the first year and then 50 percent after that.
As with many bad ideas, tariffs do sound appealing. Call it economic protectionism or nationalism, but many people, particularly blue-collars workers, are drawn to raising duties on imported goods from abroad and defending American companies. The reality is so much more dreadful.
Many do not understand that trade is not mainly responsible for American job losses. Economists have discovered that automation, not trade with other nations, is the overwhelming cause for job losses in manufacturing. Automation’s power should not be underestimated because it accounts for almost 88 percent of those lost jobs. The idea that trade is in any way significant is pure nonsense.
Trump’s new tariffs are immediately having a negative impact on American consumers. LG Electronics, a company based in South Korea, plans to raise prices on some washing and drying machine models by approximately $50. Goldman Sachs is forecasting a price increase of eight to 20 percent on new washing machines.
Like a disease, a tariff’s damage spreads quickly to other corporations and industries, not just the one it directly impacts.
The government of South Korea has decided to take the issue to the World Trade Organization. Under the WTO’s Safeguard Agreement, the U.S. will have thirty days to settle the dispute. If this doesn’t happen, South Korea has 60 days to impose their own trade sanctions.
The tariff on solar panels already has economic consequences, even in domestic industries that are supposed to benefit from it. A company called SunPower is holding off on a $20 million investment in United States, which would have expanded factories and created hundreds of new jobs. America’s solar industry is currently worth $28 billion but around 80 percent of its solar panel products are imported. Today many American companies receive different parts for solar panels overseas.
The Solar Industries Association estimates there will be a loss of around 23,000 jobs per year with the new tariff. They also expect delays and cancellations of billions of dollars in investments.
Americans should not forget the historical record, which shows that tariffs routinely lead to retaliation from other countries. There’s always the Great Depression and the dark legacy of the Smoot-Hawley Tariff Act, but there’re also many recent examples of protectionism backfiring.
Overall, former president George W. Bush was part of the free trade consensus when he was president and continues to advocate for it today — but he did impose tariffs on steel in 2002. The European Union responded with tariffs of their own.
The door has opened for many domestic corporations to lobby for more tariffs, having the potential to add more financial problems for consumers. A decision on steel and aluminum tariffs is expected to come soon.
One of the main tenets of the modern conservative movement is support for the free market. Trump’s views on trade run counter to that. Conservatives should stand firm and continue to push a free trade agenda even if it means disagreeing with the current president. There’s no reason to worry about backlash from protectionists. After all, we have 87.5 percent of economists on our side.
John M. Graber ([email protected]) is a senior majoring in history and political science.