United States: why Donald Trump imposed high tariffs on the importation of washing machines and solar panels (and how it affects Mexico and other countries)

United States: why Donald Trump imposed high tariffs on the importation of washing machines and solar panels (and how it affects Mexico and other countries)

0

They are considered the first tangible measures of the “United States First” policy proposed by Donald Trump during his election campaign.

Some even believe that they are the first bricks on which could begin to build a wall of commercial protectionism.

The US president announced on Monday the application of high tariffs for the importation of domestic laundry washing machines as well as panels and solar energy modules.

Trump took these measures after an investigation carried out by the American Commission of International Trade (USITC) that last year recommended activating them to protect the local companies that manufacture these goods.

The USITC concluded that the importation of both washing machines and solar panels had become so widespread that it threatened to cause significant damage to the local industry.

“Between 2012 and 2016, the import of washing machines in the United States increased dramatically, causing a loss of substantial market share for local manufacturers, who suffered multi-million dollar net operating losses for 2016,” the Office of the Trade Representative said in a statement. of the United States (USTR, for its acronym in English), Robert Lighthizer.

In the case of solar panels, their import increased approximately 500% in the same period. ” By 2017, the US solar industry had almost disappeared, after the closure of 25 companies, only two manufacturers of cells and modules (photoelectric) and eight companies that produce modules with imported panels were still viable,” the USTR added.

Solar panelCopyright of the image AFP

The response of the White House was immediate: the application of quotas on the import of these products, as well as tariffs that can reach 50% in the case of washing machines and 30% in the case of panels and solar products .

The safeguards applied to the import of washing machines in the United States
 First yearSecond yearThird year
The first 1.2 million imported units20% tax18% tax16% tax
Units imported from the first 1.2 million50% tax45% tax40% tax

These measures, which will be applied in a decreasing manner over several years, especially affect China and South Korea, countries of origin of most of these products, but also to Mexico and local industries in the United States.

However, its impact may reach beyond the point that some analysts believe that the decision to Trump could desenc adenar a trade war .

BBC Mundo tells you who wins and who loses with the application of these taxes.

Whirpool

The announcement of the application of the new tariffs was celebrated by the chairman of the Whirpool board of directors, Jeff M. Fettig, as “a victory for American workers and consumers.”

This US appliance manufacturer has been seeking protection for years against cheaper imports from South Korea and Mexico.

In 2011, Whirpool filed a complaint with the United States Department of Commerce alleging that these products were subsidized and dumped (the sale abroad of a product at below-normal prices).

Whirlpool washing machines.Copyright of the image GETTY IMAGES
Image caption The Whirpool company filed complaints against the importation of domestic washing machines.

Then, in 2015, the American companies filed a complaint about the import of washing machines from China.

After knowing the news of the application of the safeguards that will affect all these countries, Whirpool shares rose 2.5% and the company announced that it will create 200 new jobs .

China

China is for the United States the main foreign supplier of both washing machines and solar panels and, therefore, the main affected by the new tariffs.

Between 2012 and 2015, the export of washing machines from China to the United States went from 411,000 units to more than 2 million .

That country also increased its share of the global solar panel market from 7% in 2005 to 61% today.

Solar power plant in China.Copyright of the image AFP
Image caption China ensures that protectionist measures are the object of the accelerated growth of its solar energy industry.

According to the USTR, the Chinese producers of these solar equipment tried to evade for several years the anti-dumping measures applied against them by the United States by relocating their production in other countries such as Malaysia, South Korea or Singapore.

Beijing considered the measures taken by the Trump government as an overreaction and said it “will work with other members of the World Trade Organization to firmly defend their legitimate interests .”

FirstSolar, Tesla and other US manufacturers

The companies that are dedicated to the manufacture of solar panels in US territory such as Tesla, FirstSolar, SolarWorld and Suniva appear as born beneficiaries of the application of the new tariffs.

However, several of these companies are not American. So, for example, Suniva is controlled by a Chinese shareholder, while SolarWorld is a subsidiary of a German company.

Solar panels placed by Tesla in Puerto Rico.Copyright of the image REUTERS
Image captionThe American company Tesla is one of the possible beneficiaries of the application of safeguards.

On the other hand, solar panel manufacturers only represent around 14% of the jobs that this sector generates in the United States.

In fact, the Association of Solar Energy Industries opposed the imposition of safeguard measures because they believe that they will generate a crisis and warned that it could cost the loss of some 23,000 jobs , many of them from associated services in that sector.

South Korea

The main washing machine manufacturers imported into the United States are two South Korean companies: Samsung and LG.

Both companies have referred to the complaints presented by their Whirpool against them as an attempt to prevent Americans from accessing more attractive products.

“Everyone will pay more and have fewer options to choose from ,” Samsung said in a statement regretting the measure adopted by the US government.

For its part, the South Korean government announced that it will file a complaint with the World Trade Organization.

But while the case is resolved, its exports to the United States will suffer.

Mexico

When analyzing the application of safeguards, the authorities of the United States must assess separately the situation of those countries with which they maintain free trade agreements to determine if they are excluded or not from the measures.

This is the case of Mexico, which is associated with the United States and Canada through the North American Free Trade Agreement (NAFTA).

Installation of solar panels in the United States.Copyright of the image GETTY IMAGES
Image caption Many of the jobs in the solar energy sector come from services and other related activities.

In 2016, Mexico exported US $ 278 million in domestic washing machines and US $ 1,127 million in solar panels to the US market , according to figures cited by Mexican authorities.

In its report, the USITC determined that between 2012 and 2016, Mexico was among the top five suppliers of solar panels to the United States and that it contributed significantly to the damage caused by imports to US industry.

As for washing machines, between 2012 and 2016, Mexico sent an average of 526,000 machines of this type annually to the United States, which makes it one of the main exporters to that market. However, in this case, the USITC noted that these sales did not cause significant injury to US industry and recommended excluding Mexico from safeguards.

Despite this, the White House chose to apply its trade protection measures to its southern neighbor in both cases.

Safeguards applied to the importation of solar panels and modules in the United States
 First yearSecond yearThird yearFourth year
Tax rate30%25%twenty%fifteen%

The measure was rejected by the Ministry of Economy of Mexico, which regretted that its country has been included in the safeguards.

He announced that he will make use of all the legal mechanisms “for the United States to comply with its international obligations” and made express mention of the provisions of the NAFTA.

On Tuesday, the representatives of the three member countries of this mechanism were meeting in a new round of the process of renegotiation of that trade agreement promoted by the Donald Trump government.

About author
Profile photo of Rava Desk

Rava Desk

Rava is an online news portal providing recent news, editorials, opinions and advice on day to day happenings in Pakistan.

Your email address will not be published. Required fields are marked *