2018-01-26 | Editor : et_editor 2191 pageviews

Protective Tariff on PV Cell and Washing Machine Heralds Launch of Trade War by Trump

Amid the anticipation of Asian countries and enterprises, U.S. President Donald Trump has imposed protective tariffs on imported PV cells and washing machines, targeting those from China and South Korea, respectively, in line with his commitment to diminishing huge trade deficits with Asia during presidential campaign.

In the following year, imported washing machines within the quota of 1.2 million units will be subject to 20% tariff, decreasing to 18% in the second year and 16% in the third year, while import exceeding the quota will be liable to stiff 50% tariff, dropping to 45% in the second year and 40% in the third year. Solar panels will be levied with 30% tariff, to decrease gradually in the following four years.

The protective tariffs have been put in place, in response to the petition of two PV cell manufacturers Suniva and SolarWorld, whose U.S. operations have filed for bankruptcy protection, as well as petition by Whirlpool, as a tactic to block Samsung and LG from the U.S. market. Whirlpool's stock price jumped by 3% in the after-hours session following the announcement of the protective tariffs.

The Wall Street Journal reported that South Korea and China have protested the tariffs, alleging that the U.S. has abused trade remedies, in violation of WTO regulations. Chinese PV cell manufacturer Trina Solar believes that the protective tariffs can only bring short-term benefits to U.S. firms but will harm the latter's long-term competitiveness. U.S. domestic opponents believe that the tariff barriers will affect 23,000 jobs this year and lead to deferment or cancellation of investments to the tune of several billions of U.S. dollar.

It is commonly believed that Trump will roll out even more protective measures targeting China in the following year, in order to reduce U.S.'s gigantic deficit of over US$300 billion in trade with China, fulfilling his pledge to address unfair competition.

In fact, urged by Trump, the U.S. Trade Representative started investigation of the Chinese government requiring U.S. firms operating in China to share intellectual properties with and transfer technologies to Chinese firms. Analysts believe that even larger scale of sanctions against China will be adopted, following conclusion of the investigation soon.

Insiders point out that China and South Korea will not be able to evade the protective tariffs by moving their production lines to other countries, as the tariffs are based on safeguard clause of the WTO applicable to multiple nations, different from antidumping duties which target specific countries.

South Korea's minister of trade, industry, and energy, however, has vowed to seek recourse with the WTO, citing protectionism and unfair trade. Since the establishment of the WTO, the body has ruled six times against the U.S. resorting to safeguard tariffs, including the one on imported steel imposed by the Bush administration in 2002, which was forced to nullify the tariff later on.

Meanwhile, the U.S. government is evaluating protective measures for U.S. steel and aluminum industries in the name of national security and will come up with a conclusion in April.

(Collaborative media: TechNews, first photo courtesy of Matt Johnson via Flickr CC BY 2.0)

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