Trump marks 2nd year with Asia tariffs world has feared

Bloomberg

After a year of chest thumping,
President Donald Trump has finally delivered the type of trade blow his political base has been craving.
Trump slapped tariffs on imported solar panels and washing machines in his first major move to level a global playing field he says is tilted against American companies. The decision came two days after the one-year anniversary of his inauguration as he prepares to travel to the World Economic Forum in Davos, Switzerland, where his “America First” stance is likely to be at odds with the global business and political elite.
The key now is whether the shift from protectionist rhetoric to hard action will disrupt the broadest global recovery since the world was pulling out of the financial crisis. The initial verdict from markets: probably not. Even those directly affected, such as LG Electronics, pared losses in trading. JinkoSolar, China’s biggest panel maker, said the outcome is “ better than expected.”
“The economic impact is not material,” Trinh Nguyen, a senior economist at Natixis SA in Hong Kong and former consultant to the World Bank, said. “The concern really is whether or not this is a trend with more to come.”
Much will depend on how China responds. While China voiced displeasure, saying the tariffs were a “misuse” of trade measures, their response was restrained, for now. But there’s a list of things the world’s second-largest economy can do if the US ratchets up the pressure further.
There are still several key files remaining on the president’s desk that could lead to further action. Trump has about three months to decide whether to impose tariffs on imported steel and aluminum, while his top trade official is probing China’s intellectual-property (IP) practices.
In Europe, governments are following the Trump administration’s moves closely. Germany, which has been the subject of Trump criticism for its trade surplus with the US, is seeking talks with the administration on the tariffs, said acting Finance Minister Peter Altmaier.
“Our position is that the fewer the tariffs, the less protectionism, the better it is for the people in our countries,” Altmaier told.
Portugal’s Economy Minister Caldeira Cabral said in Davos that the European Union has a chance to step in and promote itself as defender of free trade. “By sending this message the EU is going to differentiate itself from other regions in the world that are having doubts about gains from trade,” he said.
“Coming ahead of Trump’s Davos trip, the solar and washing machine tariffs are striking, but still fall into the narrow category,” said Tom Orlik, Bloomberg Economics chief Asia economist in Beijing.
For now, the countries and companies on the receiving end of the Trump tariffs are not declaring crisis. Through its subsidiaries in neighboring Asian nations or directly, the biggest impact is potentially in China, the world’s largest producer of solar panels.
The nation is also a major exporter of washing machines, selling 21 million units abroad worth just under $2.9 billion globally from January through November 2017, according to customs data.
Chinese solar manufacturers have been figuring out how to deal with the ups and downs of the trade outlook with the US for years, and most recently since the US International Trade Commission ruled that the influx of cheaper foreign panels was hurting domestic producers in 2017.
Trump approved four years of tariffs that start at 30 percent in the first year and gradually drop to 15 percent. The first 2.5 gigawatts of imported solar cells will be exempt from the tariffs, USTR said.
The solar tariffs are lower than the 35 percent the ITC recommended in October. The body was responding to a complaint by Suniva Inc., a bankrupt US panel maker that sought duties on solar cells and panels.
In the washing-machine case, Trump was responding to an ITC recommendation in November of tariffs following a complaint by Whirlpool Corp., which accused Samsung Electronics and LG Electronics of selling washing machines in the US below fair-market value.
Trump opted for the most punitive recommendation by ITC judges for residential washers. He ordered a 20 percent tariff on imports under 1.2 million units, and 50 percent on all subsequent imports in the first year, with duties lowering in the next two years.