Trump says no trade war as he announces steep tariffs on solar, washing machine imports

US President Donald Trump signed into law a 30 per cent tariff on solar panels, which the solar industry said would lead to thousands of layoffs and raise consumer prices.
US President Donald Trump signed into law a 30 per cent tariff on solar panels, which the solar industry said would lead to thousands of layoffs and raise consumer prices.PHOTO: REUTERS

WASHINGTON (REUTERS, NYTIMES, BLOOMBERG) - US President Donald Trump on Tuesday (Jan 23) dismissed worries of trade retaliation over new tariffs his administration imposed on imported solar panels and washing machines.

Asian trading partners expressed alarm. Both industries are dominated by Chinese and South Korean businesses, which have manufacturing plants in other Asian countries and elsewhere.

"There won't be a trade war. It'll only be stock increases for companies that are in our country," he said when signing the order, adding it was good for US jobs. "You're going to have people getting jobs again and we're going to make our own product again. It's been a long time," he said.

Trump signed into law a 30 per cent tariff on solar panels, a move billed as a way to protect American jobs but which the solar industry said would lead to thousands of layoffs and raise consumer prices.

The administration also introduced a tariff on imported washing machines which will likely hurt South Korean makers.

They are among the first unilateral trade restrictions imposed by the administration as part of a broader protectionist agenda to help US manufacturers.

China, the world's biggest solar panel producer, branded the move an "overreaction" that would harm the global trade environment for affected products.

"The US's decision ... is an abuse of trade remedy measures, and China expresses strong dissatisfaction regarding this," Wang Hejun, the head of the commerce ministry's Trade Remedy and Investigation Bureau, said in a statement on its microblog.

"China will work with other WTO members to resolutely defend its legitimate interests in response to the erroneous US decision."

South Korea's trade minister Kim Hyun-chong said the new US tariffs violated WTO rules.

"The United States has opted for measures that put political considerations ahead of international standards," Kim told a meeting of industry officials.

"The government will actively respond to the spread of protectionist measures to defend national interests."

Monday's decision imposes a 20 per cent tariff on the first 1.2 million imported large residential washers in the first year, and a 50 per cent tariff on machines above that number.

The tariff declines to 16 per cent and 40 per cent respectively in the third year. The move punishes Samsung Electronics, which recently began washer production in South Carolina, and LG Electronics, which is building a plant in Tennessee.

Analysts say LG will see the bigger hit, as Samsung may be better able to cushion the blow through its other high-tech businesses. LG could see an impact of 2 percent to 3 percent on its earnings from the tariff, according to Dohoon Lee, Seoul-based analyst at CIMB Securities.  Sweden's Electrolux faces tariffs of more than 70 per cent on its washing machines which are produced in Mexico and imported into the US, and the latest levy will add more pressure, according to Hye Min Song, industry manager of consumer appliances at Euromonitor International.

A clear winner, though is US firm Whirlpool Corp. This is the company that started the washing machine fuss by filing a petition in 2011 and has been seeking relief ever since. The company is now best poised to gain share - it already has about 43 per cent of the market for washing machines in the US.

Asian countries accounted for more than 90 per cent of the US$3.7 billion (S$4.9 billion) in US solar module imports in the first 10 months of last year, according to Bloomberg New Energy Finance.

Trump said during the signing of the new tariffs that "a lot of manufacturers" will come to the United States to build solar plants.

The US solar industry countered that the move will raise the cost of installing panels, quash billions of dollars of investment, and kill tens of thousands of jobs, raising questions about whether Trump's move will backfire by triggering mass layoffs.

"We are not happy with this decision," said Abigail Ross Hopper, president of the US Solar Energy Industries Association, on a conference call with reporters on Tuesday.

"It's just basic economics - if you raise the price of a product it's going to decrease demand for that product." The leading solar trade group predicted that the tariffs could cut forecast solar installations this year by nearly 20 per cent, to 9 gigawatts from 11 gigawatts, and lead to the loss of 23,000 jobs in the United States, the world's fourth-largest solar market after China, Japan and Germany.

Research firm Wood Mackenzie estimated that over the next five years the tariffs would reduce US solar installation growth by 10 to 15 per cent.

The US solar industry employs more than 260,000 workers - about five times more than the coal industry - with the vast majority involved in installation rather than panel manufacturing.

Research firm CFRA said it expects the tariffs to increase solar system prices by about $0.10 per watt. It reckons First Solar, a US company with offshore panel manufacturing whose technology is not included in the tariff, would be the biggest beneficiary, while China manufacturers such as JinkoSolar would be the biggest losers.

The picture, though, is far from simple.

While the United States accuses China of swamping the market with artificially cheap, subsidised solar panels, increasingly, those panels come from elsewhere.

Chinese companies assemble panels in factories in other Asian countries before shipping them to the United States. Countries like Malaysia and South Korea now account for most of the United States' solar imports, according to data from Global Trade Atlas, a database maintained by the research firm IHS Markit.

Chinese companies like JA Solar and JinkoSolar, for example, have opened factories in Malaysia, though most such businesses still do much of their research and development at home.

The broad manufacturing base means other countries may face job losses and other hardships in the face of the US tariffs, which could galvanise opposition to the president's action.

US companies also manufacture some of their panels in Southeast Asia before importing some of them back into the United States. But their products tend to use a different technology, known as thin-film solar panels, which are not covered by the latest tariffs.

The Trump administration's move nevertheless leaves room for negotiation.

The tariffs on solar panels were not as high as US companies had requested. And with washing machines, the tariffs were somewhat higher than requested, but come with a series of different thresholds depending on the number of imports.

He Weiwen, a former Chinese Commerce Ministry official who is now an influential trade policy researcher in Beijing, said Chinese policymakers had reacted with "strong dissatisfaction" to the tariffs.

But he predicted that China's response would at first be cautious, as officials wait to see how strong the other US actions will be.

"We cannot expand to an overall trade war," he added.