Jordan Candler / January 23, 2018

Does Trump Miss the Mark With Solar Tariffs?

In essence, Trump’s decision continues the government’s proclivity for picking winners and losers.

This week, solar industry imports were dealt a heavy blow with Donald Trump’s decision to impose a 30% tariff. The Associated Press reports that among those advocating for the tariff on solar panels was the U.S. International Trade Commission. According to U.S. Trade Representative Robert Lighthizer, “The president’s action makes clear again that the Trump administration will always defend American workers, farmers, ranchers, and businesses in this regard.” That’s a shot across the bow ahead of trade negotiations this week.

China’s Commerce Ministry was angered by the tariff, responding: “The U.S. side once again abused its trade remedy measures. China expresses its strong dissatisfaction with this.” Mexico is also rattled. The nation’s Economy Department shot back, “Mexico will use all available legal resources in response to the U.S. decision to apply protections on Mexican washing machines and solar panels.”

These complaints are to be expected given where they’re coming from. Nevertheless, was this a wise decision? As Heritage Foundation analyst Katie Tubb explains, not exactly. She writes: “The case involves two failing manufacturing companies — Suniva and SolarWorld — which have petitioned the government for globally applicable tariffs on inexpensive imports of solar cells and panels. That petition has run the gauntlet of comments, hearings, and analysis from the U.S. International Trade Commission. Since then, organizations across the political spectrum, including the Solar Energy Industries Association, have made the case for why the requested tariffs would be harmful for the solar industry writ large.”

Tubb lists three justifications for “why rejecting the request for sweeping tariffs would be consistent with Trump’s campaign trail ideals and policy vision for energy dominance.” It begins with innovation. As Tubb explains, “There is almost no better way to fossilize an industry than by guaranteeing prices and knocking out the competitors of a select few companies. The only innovation that this spurs is creative ways to lobby the government for new ways to interfere in energy markets.” Moreover, “[Government] intervention would also punish competitive American solar companies in order to keep two failing ones afloat.”

Secondly, tariffs handcuff competition. “Trump should protect competition, not specific competitors,” says Tudd. “The solar industry in America can provide customers the best, most affordable service to Americans when it is able to access components from the most competitive companies around the globe. The proposed tariffs block this access. In essence, they are a massive regulatory subsidy for Suniva and SolarWorld — at the expense of the rest of the solar industry.”

And finally, there’s the issue of fostering a healthy job market. Tudd notes: “Suniva and SolarWorld argue that global tariffs are essential to their survival and will create thousands of jobs. Using the force of government to eliminate a company’s competitors will almost certainly preserve those company jobs.” However, “There will be negative implications for the rest of the industry and the indirect jobs it creates if the administration bends over backward to shore up two failing companies. The federal government shouldn’t be the arbiter of whose job is more valuable.”

National Taxpayer Union’s Free Trade Initiative director Bryan Riley makes yet another shrewd point: “Because the government provides a whopping 30 percent tax credit for the installation of solar energy systems, a big chunk of increased costs generated by the new trade restrictions will be paid for by the federal government. That doesn’t seem like an ‘America First’ policy.”

In essence, Trump’s decision, unfortunately, continues the government’s proclivity for picking winners and losers. Furthermore, the Associated Press reports, “Sen. Ben Sasse … said Republicans need to understand that tariffs are a tax on consumers.” He’s right. There’s no doubt any of this was the administration’s intent — Trump, after all, once pledged, “We will get the bureaucracy out of the way of innovation, so we can pursue all forms of energy” — but nevertheless, the decision was made without taking these issues into account. Imposing tariffs on the solar industry wasn’t one of Trump’s brightest decisions.

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