An outlook on how the imposition of steep tariffs on washers and the solar industry is likely to play out in the U.S.

The imposition of these tariffs are in line with Trump’s ‘Make in America’ push and could significantly effect its skewed trade balance with China.

With U.S. President Donald Trump slapping steep tariffs on solar panels and on imported washing machines, domestic producers, including Whirlpool Corp are set to gain significantly.

Significantly, the tariffs on the renewable energy industry are the first of several potential trade restrictions.

Trump’s decision in both “Section 201” safeguard cases comes in the wake of findings by the U.S. International Trade Commission that the import of both products “are a substantial cause of serious injury to domestic manufacturers,” said Robert Lighthizer, the United States’ Trade Representative in a statement.

Impact on washers

The import tariffs on the washing machines were harsher than those recommended by members of the ITC while the solar tariffs were lower than those hoped by U.S. domestic producers.

As a result of these new tariffs, consumers are likely to pay more for new washing machines as well as for the cost of solar installations.

The tariffs impose a 20% duty on the first 1.2 million import of large residential washers in the first year, followed by a 50% tariff on numbers above 1.2 million in the second year, and declines to 16% in the third year.

As for the import of solar panels, the tariffs imposed are 30% for the first year and declines to 15% by the fourth year. However, the tariffs allows the import of 2.5 gigawatts of unassembled solar cells tariff-free, each year.

After the imposition of the tariffs, Whirlpool, which sought the washers “safeguard” action against its peers LG Electronics and Samsung Electronics following several years of anti-dumping cases, saw its shares rise by 1.8% in after-hours trade.

“By enforcing our existing trade laws, President Trump has ensured American workers will compete on a level playing field with their foreign counterparts,” said Jeff Fettig, Whirlpool’s Chairman in a statement.

Samsung has already begun building a washing machine plant in South Carolina, while LG is building one in Tennessee.

“This tariff is a tax on every consumer who wants to buy a washing machine. Everyone will pay more, with fewer choices,” said Samsung in a statement.

LG Electronics stated that the tariffs will hinder employment prospects of its new plant scheduled to begin operations in late 2018 or early 2019.

The imposition of the tariffs are likely to hurt Sears Holdings, a retailer, whose Kenmore brand sources its larger washers from LG’s overseas factories.

Impact on the renewable energy industry

The imposition of these tariffs underscore Trump’s leaning towards the fossil fuel industry, an industry that he had openly said he would protect; these tariffs however will only slow the shift to renewable energy sources in the U.S.

As per MJ Shiao, head of renewable energy research for Wood Mackenzie, the tariffs are likely to reduce the projected U.S. solar installations by 10% to 15% in the next 5 years.

”It is a significant impact, but certainly not destructive to the end market,” said Shiao.

The Solar Energy Industries Association, a solar energy trade group, had campaigned against the tariffs saying their imposition would create a “crisis” for the burgeoning industry and result in the loss of 23,000 U.S. jobs in 2017 as well as the cancellation of billions of dollars in solar investments.

However the U.S. domestic solar panel producers had sought the imposition of import duty by 50%, the highest allowed under law, saying they are unable to compete with the influx of cheap imports, mostly from China, which has caused the price of solar panels to drop by more than 30% since early 2016.

China Angle

The move should be seen in the larger context as Trump is likely to take a series of potential tariff actions, which includes import restrictions on the aluminum and steel sector under a national security trade law that dates back to 1962, which could balance its skewed trade position with China.

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Categories: Creativity, Economy & Finance, Entrepreneurship, Geopolitics, HR & Organization, Regulations & Legal, Strategy, Sustainability

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