Donald Trump and China

Donald Trump has finally dealt his first blow to China’s economy

The president ends a year of procrastinating on tough trade actions with big new tariffs on solar panels.

By Zeeshan Aleem

 Updated Jan 23, 2018, 2:53pm EST

China manufactures more than two-thirds of the world’s solar panels.

Kevin Frayer/Getty Images

President Donald Trump has finally dealt his first blow to China’s economy.

On Monday afternoon, the US Trade Representative, the agency that oversees the country’s trade policy, announced that the US is imposing 30 percent tariffs, or border taxes, on imported solar panels. Since most of the solar panels in the US come from China — the world’s leader in solar power production — the move is a pointed jab at Beijing.

Announcing the new tariffs, US Trade Representative Robert Lighthizer accused China of unfair trade practices like using large government subsidies to boost the production of panels and give China a leg up over international competitors.

Wang Hejun, a top trade official in China’s commerce ministry, expressed “strong dissatisfaction” with the US’s move in a statement on Tuesday, and said that Beijing intends to “resolutely defend its legitimate interests.”

Trump told reporters in the White House on Tuesday, “There won’t be a trade war.”

The tariffs are Trump’s first strike at China’s economy after a year of procrastinating on campaign promises to get tough on US trade with China. And it could be the first of many — Trump must make decisions on whether to punish Beijing over the way it produces steel and aluminum, and allegedly steals intellectual property from US businesses, in the coming months.

About a decade ago China was a minor player in solar panel manufacturing, but today it’s a global powerhouse and creates more than two-thirds of the world’s panels. Its dominance has taken a toll in production in the US: More than a dozen US solar panel manufacturers have shuttered factories in the past six years, in part because they’ve been unable to compete with Chinese producers.

Edward Alden, a trade expert at the Council on Foreign Relations, told me that the 30 percent tariffs — which will shrink incrementally in subsequent years — are “going to have a real impact” on the Chinese solar panel industry.

But he also pointed out that China will likely also take note of the fact that Trump could’ve made the tariffs even higher but opted instead for a moderate approach.

Trump could have acted alone. Instead, he went with a bipartisan recommendation.

The Trump administration issued tariffs after considering the recommendations of an independent, bipartisan panel called the US International Trade Commission. That panel was tasked with measuring how the influx of foreign solar panels has caused harm to domestic manufacturers, and submitted recommendations for tariffs based on their assessment of the damages. On balance, those recommendations came out to around 30 percent tariffs on solar panels.

Trump had three main options — he could’ve chosen to issues tariffs that were less severe than those recommendations. He could’ve gone with what the commission recommended. Or he could’ve gone with something more severe than it recommended — tariffs of 40 to 50 percent — to signal how tough he’s willing to get with China.

Alden says that by going with the commission’s recommendation, Trump chose the “middle ground.” In other words: tough, but not spectacularly adversarial. And by acting in accordance with recommendations from a commission that’s supposed to be bipartisan, Trump’s move looks more technocratic than political.

So while China isn’t happy about the tariffs, the measured way Trump actually went about it won’t go unnoticed by Beijing or the trade world more broadly.

China isn’t the only one angered by Trump’s decision. Much of the broader solar industry in the US, which is composed of businesses that install solar panels, lobbied against these tariffs. They argued that the punishing border taxes will increase their costs and deal a blow to their businesses.

As my colleague Umair Irfan notes, of the roughly 260,000 to 370,000 workers in the US solar industry, only about 38,000 work in manufacturing — most of the rest work in installation.

Alden says that solar panel manufacturers in the US need technological breakthroughs to make production more efficient, and that on balance, the solar industry in the US won’t see a huge boost from Trump’s move.

“The net effect will be to slightly raise the cost of installation without any significant benefit to domestic manufacturing,” he told me.

The administration also announced tariffs on washing machines, a strike that mainly hits South Korea. South Korea’s Samsung Electronics and LG Electronics hold a quarter of the US market, shipping between 2.5 million and 3 million washing machines to the US every year.

South Korea’s Trade Minister Kim Hyun-chong said the US had violated World Trade Organization rules with its tariffs. “The United States has opted for measures that put political considerations ahead of international standards,” Kim told industry officials on Tuesday.

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