For thirty years as a businessman, Donald Trump hewed to the steadfast belief that the United States was under unfair economic attack from its partners and rivals in global trade. Imposing a tough new regime of tariffs was always the centerpiece of any strategy that might emerge.
When he ran for office, he vowed again and again to slap tariffs on China. That defied the orthodoxy of the Washington establishment and the rest of the world, which had hailed “free” trade as the panacea for ensuring economic growth and lifting up what we once called the Third World—before that term, too, was banned by the word police and deemed politically incorrect.
That kind of one-world condescension has cost us hugely, and the Chinese continue to exploit it. President Trump has been haranguing us about it since the 1980s. To the former New York real estate dealmaker, the most humiliating thing of all is getting suckered in a bad deal, and China had been suckering us from the get-go.
China, and Japan before it, had used a muscular industrial policy to build their bases in manufacturing and technology, picking industries they hoped to dominate one day and deploying a range of subsidies, surtaxes, incentives, penalties, and trade barriers to give their companies an advantage over foreign rivals. When they were small and plucky, that was viewed as allowable: let them rise.
The problem was that they and other nations continued their industrial policy practices even after they had grown up and were thriving. Meanwhile, the United States eschewed establishing any kind of assertive industrial policy of its own. President Trump wanted to reverse that.
Thus, from the moment he moved into the White House, even before the Wuhan crisis overtook the nation and his agenda, he was determined to confront China’s egregious excesses. He already had a plan in mind. It would rile his critics and grant him extraordinary, freewheeling tariff powers as he grappled with China’s government. Shrewdly, he would take that first step to impose new tariffs and change world trade by resorting to a law passed fifty-five years earlier that included a provision so rarely invoked that it was considered a dead letter.
President Trump’s declared intent to slap tariffs on China flew in the face of the orthodoxy preached by the high priests of free trade: big business and the Chamber of Commerce; big-labor unions (which represented less than 7 percent of private workers); the heads of the Republican and Democratic parties who were in the room agreeing to the fiasco; economists at the best universities in the world and multinational corporations; and the New Oligarchs of Silicon Valley, who were keen on importing cheap engineers from overseas.
The battle went beyond an arcane policy agreement. It was President Trump’s shock-and-awe attack on the globalist elites who had fattened themselves on free trade while American workers had suffered the consequences. He owed them nothing special; they had done nothing to elect him. That made him even more of a mortal threat to them.
The president was braced for the pillars of the establishment to go all out in opposing him. In that regard they exceeded his expectations. Three days after he moved into the White House, he set off the first of many kerfuffles to come by summarily scrapping the plans of his predecessor and both parties to join eleven Asian nations in the Trans-Pacific Partnership (TPP).
A chorus of critics cried out. They jumped past debating policy to question the new president’s intelligence, experience, and wisdom. The opposition took the move personally, sulking at the offense. How dare President Trump do something in the opposite way from the way everyone else before him had done it? How dare he simply toss aside, on his third day in office without even thinking about it, the diligent work of so many hundreds of trade experts and congressional staff? They actually said that.
One of the nastiest critics was the late senator John McCain of Arizona, the revered Republican gray head and Vietnam War hero. A couple of weeks later he called President Trump’s plan “stupid” and berated other Republicans for failing to stand up and blast away in similar fashion.
Moreover, he did so premeditatedly, in a formal statement quoted at length on the Business Insider website: “I’m more than a little outraged. . . . As Trump has gone on to all kind of other stupid things in the trade-policy arena, the relative silence on this issue from the congressional leadership is appalling.” He complained that the United States’ role as a leader of an open trade system, “something that generations of American leaders have worked to build and protect ever since the Franklin D. Roosevelt administration,” was being “trashed by the president of the United States and the congressional leadership is silent. What the hell are they thinking? Or are they just pusillanimous cowards?”
Business Insider reported that Joshua Meltzer, a wonk at the Brookings Institution, a center-left think tank, had declared, “This is the first administration that utterly misunderstands trade. I mean they’ve just got it basically and utterly wrong.” He’d said that Peter Navarro, the new Trump advisor and fierce hawk on China, was “just wrong, flat wrong. I’m not the only person to say that—every economist on the right and left says the same thing. And so, Trump misunderstands trade, and his economic advisors do.”
Another economist, Lee Branstetter at Carnegie Mellon University, who had helped hammer out TPP terms as a member of President Obama’s Council of Economic Advisers, told Business Insider, “The fact that all that effort has come to nothing is really quite infuriating.” He and the reporter were apparently unaware that his objection was hilarious.
For as long as anyone in trade could remember, the superior form of international deals had always been multilateral accords that brought together as many parties as possible to agree on terms across as wide a region and as many products and industries as possible. That had been seen as intelligent and efficient: one size fits all.
It was, however, the converse of what President Trump had in mind. The Trans-Pacific Partnership accord had been aimed at putting up a stronger united front against China by uniting the United States with other Asian countries, but even Democrats were cooling on it. The new occupant of the White House preferred one-on-one bilateral trade deals—and he had been waiting a long time to confront China in his own distinctive way.
Four months later, the Trump administration quietly took a first step toward imposing new tariffs on China. It was the start of building a transformative new trade policy for the Trump Century. The left-wing corporate media paid little attention.
On April 27, President Trump ordered Wilbur Ross, the distressed-assets buyout billionaire whom he had named secretary of commerce, to launch an investigation into whether imports of steel and aluminum posed a threat to national security.
It was a misdirection play. We are the number one importer of steel in the world, in part because we lack the natural resources to make it from scratch. We bring in 30 million metric tons each year—and none of it comes directly from China, the number one exporter of steel to the world. China has half the worldwide steel market, and it is the number one producer of aluminum, with two-thirds of the global output. Our allies Canada, Brazil, and South Korea are among our biggest providers. No matter; Commerce officials believed that China was hurting US steel producers. And it was.
Now, to take the first step, President Trump was invoking the Trade Expansion Act of 1962, which was aimed at empowering the president to reduce tariffs and negotiate free-trade agreements. A particular provision, Section 232, granted the president the power to hike tariffs on national security grounds. That provided him with the loophole he needed.
China had developed far more steel production capacity than its economy could possibly use, and it was dumping the excess supply onto the global market. That had depressed prices everywhere else in the world. Moreover, Chinese steel was arriving in the United States anyway, after first being transshipped to third-party countries to sidestep the penalties that the United States had imposed on China steel some years earlier for the same kind of trade violations.
The journey to a new regime of tariffs on China had begun. Few observers understood that at the time, not even the president’s own advisors. Most of them opposed the idea of tariffs, especially so early in this new presidency. A second step toward confronting China came on May 17. The US International Trade Commission, the independent, bipartisan panel that advises the administration, launched an investigation of unfair trade practices in the US solar panel market.
The ITC was responding to a request filed by SolarWorld, a small maker of solar panels in Hillsboro, Oregon, and an Atlanta-based manufacturer named Suniva. Suniva had already gone bankrupt and fired all two hundred of its employees. Both had struggled with brutal price competition from China rivals. This time, the ITC investigation invoked a different provision of a different law: Section 201 of the Trade Act of 1974.
That was a hidden gift to President Trump. Typically, when a US company files a complaint against overseas rivals, the US government takes the case to the World Trade Organization. The WTO initiates an investigation that can drag on for years. It rules on the merit of the case, often going against US firms. Appeals slow the process.
President Trump has called the WTO biased and blatantly anti-American, with judges from other countries predisposed to ruling against us. I concur emphatically.
By contrast, the SolarWorld complaint, under Section 201, was a “safeguard case,” and it granted the president wide power to help an industry in trouble. It hadn’t been used since George W. Bush had invoked it in restricting steel imports in 2002, a year after the terrorist attacks on 9/11.
Now, by invoking Section 201, President Trump had the power to declare tariffs on Chinese solar imports solely in his own hands. That gave him an early chance to prove that tariffs were the best way to force our trading rivals to renegotiate terms that had disadvantaged us for years. For a president who had been calling for tough tariffs on trading bullies such as China for much of his life, it must have felt exhilarating.
The Great Ripoff of America started from the moment the United States, in the year 2000, voted to provide “permanent normal trade relations” to China, giving it “most favored nation” status. That committed us to granting China the same terms we gave even our best longtime allies. Yet China wouldn’t have to do much to open its markets to us. US politicians and trade negotiators led the way in agreeing to that, spawning two decades of steady, chronic economic damage here at home.
It was a historic misjudgment on the part of our government leaders, scandalous for the decades of deleterious effects it would wreak on US workers and their families. As I have said many times in many venues, free trade has been the most expensive policy this nation ever pursued. There is nothing free about ever-larger trade deficits, mounting trade debts, and the loss of millions of good US jobs.
The vexing thing is less that they made that error and more that even after its draining consequences began to surface, the contented policy elites, big-business fat cats, and navel-gazing economists of the establishment continued to insist they were right. We told you so, gentlemen (for most of that time, few women were on hand to bear any of the blame).
President Trump likes to keep score. For him, the size of our trade deficit with China and the rest of the world is equivalent to the Dow Jones Industrial Average for the stock market. The trade deficit is the measure of how much more in goods we buy from China and other countries each year than they buy from us.
A trade deficit of zero, totally in balance, is ideal. A trade surplus would be even better; it would mean that other nations were buying more in US goods than they were selling to us. Their capital and their demand for more goods made in the United States would spur hiring and stronger growth in this country.
Instead, we have sent $10 trillion more overseas than our foreign trading partners have sent back to us in the past twenty years. That is how much more we spent on foreign-made products and services than overseas partners spent on products made in the United States. It has been a massive drain of cash, capital, energy, jobs, and innovation out of the United States and into the rest of the world, especially China. This has deprived us of capital and hurt the growth of our factories, assembly plants, offices, and stores.
Citizen Trump saw the soaring trade deficits as the clearest evidence that the United States was losing a trade war that had been under way for twenty years. Our leaders were chumps, bad negotiators who had been suckered by craftier leaders and other players who had parroted free-trade slogans and covertly advanced their own national interests. The trade deficit was a scorecard—and the United States was losing.
For consumers in the United States, the shortsighted upside was the low prices for goods created by China’s flooding the American market with supercheap products, including the latest in electronics: HDTV screens the size of a ping-pong table for a pittance; the handheld supercomputers now known as smartphones. They often bore American brand names but were made by Chinese hands. This supposed benefit to consumers may have sedated the people while our policy leaders failed us—but never did it sedate me. I knew we were losing badly by the day in the one-sided exchange that diminished the United States and made China great.
President Trump’s bent placed him in the center of a gladiator’s coliseum, surrounded by a frightful array of people with the most to lose if we toppled the old order: giant corporations, yet also powerful labor unions; the Democrats, but also the venerable Republicans who had been complicit in creating the problem; liberal think tanks and conservative ones, too; and, as always, his unruly Fake News Greek chorus.
They went after President Trump even before he won the election. As the Republican National Convention was nominating him in July 2016, the New York Times published an “analysis” of the Trump tariff plan. It described the conventional view:
Mr. Trump’s framing is in direct conflict with the view even of many economists who are sympathetic to the idea that current trade arrangements work to the detriment of American workers and want to see change. In the more widespread view among economists, trade deficits are not inherently good or bad; they can be either, depending on circumstances. The trade deficit is not a scorecard.
Sniff, sniff.
China is the biggest part of a larger problem for the United States. Even our allies have engaged in unfair trade terms that penalize the United States. This is why, simultaneously, the president also pursued that sore point in separate deals with Mexico, Canada, Japan, the European Union, and the United Kingdom. This man likes to negotiate one-on-one.
Currently, the US trade deficit with the entire world runs from $600 billion to $700 billion a year. China consumes roughly half of that massive flow of capital out of our country. Our trade deficit with the world as a whole—how much more money we are paying to other nations for their goods than they are paying us for the goods they buy from us—less than doubled in twenty years. But our deficit with China soared more than fivefold.
China now sells the United States a total of $450 billion in goods annually and growing, while the United States sells China only $100 billion a year. In the twenty-year period from 1999 to 2019, China’s share of the total US trade deficit rose from 21 percent to 56 percent of the total trade gap.
Thus, China has benefited far more than any other country from the explosion in international commerce and unfair “free trade.” And the United States has fared far worse than any other nation.
In 2019, that imbalance produced a US-China trade deficit totaling $345 billion. This means that every three years, we are sending China $1 trillion more than China sends back to us. We are richly funding the country that wants to supplant the United States as the leader of the world.
President Trump spent years hammering on that—as did I—in the style with which he approaches everything: bluntly, relentlessly, and repeatedly. He blames previous US administrations, rather than China and other countries, for this debilitating drain on our assets. Our leaders let this happen.
Along the way, most US business and political leaders expressed little concern. It mattered not a lick whether Democrats or Republicans controlled the White House, the Senate, or the House of Representatives; the slogans of so-called free trade dominated both political parties and the boardrooms of corporate America. The trade policies of Al Gore, George Bush, John McCain, Barack Obama, and Mitt Romney were all but indistinguishable.
The growing trade deficit was earnestly reported in newspapers such as the Wall Street Journal as if it were a weather report—something simply to talk about. Economists, even those who knew better, mostly kept quiet about it. They were high priests of the cult of free trade and wanted to avoid riling the American people.
As I have said before and will repeat, few honest economists practice the craft, and none of them works for a US corporation. The ones who do are propagandists hired to preach the free-trade gospel that will ensure their giant employers an ample supply of cheaper labor overseas. If that hurts American workers, too bad: shareholder returns, right?
Other nations around the world, including Germany, Japan, and China, impose serious limitations on US imports and protect their own national industries. By contrast, our government spent decades pursuing a policy of openness in trade, with near neutrality as to whether one country or region was reaping the upside at our expense.
Nobody called for an intervention to demand that our trading partners stop the cheating. The topic didn’t come up on the daily talk show circuit or in the editorial pages of the major newspapers.
The enormous increase in the US trade deficit failed to grow into an issue even in the presidential debates that took place every four years. This slack attitude was captured perfectly at the party nominating conventions for the 2008 presidential campaign when Obama ran against McCain. The Republican Party platform on trade said, meekly and weakly, “we need to be at the table when trade rules are written to make sure that free trade is indeed a two-way street”—ignoring the fact that US leaders had been there at the start, approving the very policies that were killing us.
The Democratic platform on trade was laughable. Already, with Obama politics pushing the party even further left, fashionable lib concerns were overwhelming the traditional Democratic attachment to the American working class. The Dem platform plank sounds like the opening essay for a high school yearbook. Or a hippie commune:
We believe that trade should strengthen the American economy and create more American jobs, while also laying a foundation for democratic, equitable, and sustainable growth around the world. Trade has been a cornerstone of our growth and global development, but we will not be able to sustain this growth if it favors the few rather than the many. We must build on the wealth that open markets have created, and share its benefits more equitably.
In other words, the Democratic Party’s position was that the United States owns too much of the world’s wealth—never mind whether we earned it or not—and the government should endeavor to share it “more equitably” with the rest of the world. The Dems also wanted to ensure that the wealth of the richest people in the United States could be collected in greater amounts and redistributed to the rest of us. This stops short of policies that could help create new jobs so we can earn more money on our own rather than taking it from Jeff Bezos.
This has enriched China and starved the United States of domestic investment, making our companies dependent on foreign investment—and putting them under foreign control. Diverting production to cheaper labor markets overseas has shrunk US manufacturing and suppressed wage growth.
It has also contributed to layoffs and restructurings that left millions of people out of the workforce and no longer even bothering to look for a job. The collateral damage of lower wages and less job growth leads to more people applying for government assistance, making more of us more dependent on it.
Everyone in power allowed this to happen, in part because they had a hard time seeing it and in part because the worst impact showed up in the blue-collar “flyover” states that the people in power barely cared about. The most damaging effects came in towns in Ohio, Pennsylvania, and Michigan, while service jobs were growing in urban markets such as New York, Los Angeles, and Chicago.
This consequence of the trade deficit adds to the federal budget deficit, how much more money the government spends than it takes in each year. When the economy fails to grow adequately, the government has to borrow more to pay out more in stimulus packages. Our economy was so battered after the Great Recession of 2009 that it limped along for years instead of racing into recovery, as it had in the wake of prior economic crises.
The yawning trade gap with our largest rival would be a tough but fair outcome if US companies had had a fair shot at competing and had faltered. In the 1980s, when US automakers were near bankruptcy because of competition from better-made and better-priced cars made in Japan, they begged for protectionism and tariffs. Yet the legendary Lee Iacocca, a friend and mentor of President Trump, led Chrysler to a revival without them.
We lost the trade battle in the decades that followed, and unfair trade terms were only one factor. Another aspect was the apparently easy decision by US companies to cut and run rather than find a way to make things work back home. Past presidents bragged about their retraining programs for displaced workers while collecting campaign contributions from CEOs who were sending jobs overseas. Trump’s predecessors did little to shame them for it or find solutions to reverse the corrosive trend.
They were too sophisticated and intelligent to do that, too well briefed by the experts who had designed the dysfunctional system in the first place. President Trump took a different route. Even before he took office, he dished out blistering criticism of Carrier Corporation, the HVAC giant, after which it scrapped plans to move 1,400 jobs to Mexico. Liberals pointed out that three years later, Carrier moved many of those jobs to Mexico, anyway. However, tell that to the people who had kept their jobs for three more years and the executives who had realized that sending jobs to Mexico would have been a business failure to be ashamed of. Who knows how many companies scrapped relocation plans to avoid the same PR debacle?
President Trump knows that tariffs can help on this front, too. The new regime was only the starting point rather than the end goal. President Trump was intent on tackling myriad other weaknesses and outrages in US trading terms with China, in particular.
Even when China granted US businesses access to its market, its terms were onerous. For the US imports it did let in (soybeans, aircraft, and microchips), it charged far higher tariffs than the low tariffs the United States applied to imports from China on smartphones, computers, and apparel.
When China did allow US firms to set up shop inside the country, it imposed a system of forced corporate marriages. They were required to form joint ventures with Chinese companies and hand over majority ownership to them—and share intellectual property and technology secrets with them. At times, Chinese firms would set up shadow factories and turn out knockoffs in direct competition with their US partners. US companies endured the abuse silently, hoping things would get better.
The world sat back and let China behave that way with impunity. Both Democratic and Republican administrations in the United States looked the other way and did nothing to call it out. US multinationals, always lustful for the great potential of the huge Chinese market, were silent for the most part. They complained to Washington only privately, if bitterly. Everybody was high on globalization.
The gnawing thing was that those same complainers took a long view and maintained that ultimately, the free-trade structure of the past would pay off in the end; China would mature on the global stage and amend its evil ways. Neither of those predictions came true. They were laughably naive.
Donald Trump had always argued that tariffs would force China to repatriate some of the trillions of dollars it was sucking out of the US economy; pay us back. As the world would soon observe, the Trump tariffs provided even more advantages.
The mere threat of tariffs would give a new incentive to other nations to get out in front of the trading crackdown and grant better terms to the United States. Some foreign firms would see more upside to building factories in the United States, rather than shipping their products in from overseas. Tariffs would make the latter option more costly.
The new policy also would put US companies on notice. They might then prefer to build in the United States rather than import from overseas. US giants knew by that time that if they dared try to shutter a US factory and move production to China or elsewhere, they risked a bitter rebuke from the president—on Twitter, no less, where ridicule and scorn spread with viral intensity.
That risk loomed large, even if moving production overseas or buying from foreign suppliers made the best economic sense from a profit-and-loss standpoint.
More important, because of the unusual tactic of invoking national security concerns and Sections 232 and 202, President Trump now had a new stack of bargaining chips at his disposal.
The loophole gave him wide wiggle room to impose new tariffs, as well as increase or decrease them. Or he could delay or extend them and decide which nations would be affected and how much. All of that without the interference of the World Trade Organization or the fractious gridlock of Congress.
That would enhance President Trump’s position at the negotiating table and, of course, create supposed fears in the resistance that the president was overstepping the powers bestowed on him by the Constitution.
The first test lab for the effort was the US solar panel industry. By now it should have been thriving with a couple million jobs. In the Obama era, the nascent industry got a huge boost in the stimulus package passed in response to the financial meltdown in 2008.
Congress had authorized $787 billion in new spending to help the economy rebound. The sum was considered to be massive at the time, although it would be dwarfed a decade later by the cost of recovering from the Wuhan shutdown. Tucked inside the stim pack was an injection of $90 billion in easy government money for green energy, including $27 billion for the fledgling solar industry in the form of loan guarantees, grants, and tax incentives for green products.
It was intended to seed an entirely new US industry, one that would create millions of green jobs in solar and wind energy, electric car batteries, and more. Solar energy was such a naturally perfect idea that adherents had been on a quest for the right solutions since the 1970s. They had never gotten that far, though, because the price of oil, coal, and gas had never risen high enough to make green energy a competitive option.
Now the federal government’s new largesse finally would deliver on the green revolution and create enough jobs to replace the almost 10 million jobs in the US fossil-fuel energy industry. Those evil carbon emitters.
The real beneficiary, as it would turn out, would be China.
No wonder that would be one of the first areas targeted for tariffs by the Trump administration. It was a twofer: a way to both land a direct hit on China and neutralize the fallout from a bloated Democratic program. Dozens of solar start-ups popped up in the United States to get in on the gold rush. The volume of solar energy production capacity installed annually in the United States more than tripled from 2012 to 2016. But the Americans got slaughtered.
In the same period, imports of solar panels grew by 500 percent—fivefold, quintupled! Prices fell by 60 percent in that period, driven by artificially cheap imports from China, “to a point where most U.S. producers ceased domestic production, moved their facilities to other countries, or declared bankruptcy,” as the ITC later reported.
Twenty-five companies making solar panels in the United States went out of business in five years. That left only two US producers of solar cells and modules—one of which exited the business in 2017—and eight firms that produced modules using cells imported from—yup—China.
By 2012, even before the big Obama push, China’s share of the global solar cell market, at just 7 percent in 2005, had soared to 62 percent. It now controls almost 70 percent of the total global expansion capacity.
If Chinese manufacturers had simply outrun US companies, outcompeted them, that would be fine. But their win was a result of unfair trade, just as President Trump said it was. Industrial policy and unfair government subsidies had created China’s competitive edge, the ITC later ruled. That violates the tenets of international trade.
Struggling solar firms began appealing for help to Commerce and the ITC almost a decade ago, but it was like playing a game of whack-a-mole. The International Trade Commission would assess tariffs on solar panels from China, and makers would shift their production to another country. That enabled them to avoid the tariffs and continue their predatory pricing. Target that new country, and they would pack up and move again.
In 2011, Commerce had ruled that China was subsidizing its producers to sell panels below cost in the United States. A year later, it imposed antidumping penalties and so-called countervailing duties, “but Chinese producers evaded the duties through loopholes and relocating production to Taiwan,” an ITC report said.
So domestic makers filed new petitions to close the Taiwan loophole, and, as the ITC noted in 2013, “Chinese producers responded by moving production abroad, primarily to Malaysia, as well as Singapore, Germany, and Korea.”
At that point, the investigation into whether steel imports should be tariffed was well along. That was battleground number one. The SolarWorld case was battleground number two. Then a third front opened in the Trump team’s China strategy: two weeks after the ITC began investigating China in the solar panel market, Whirlpool filed a Section 206 “safeguard” complaint of its own with the ITC, on May 31, 2017. This time the target was white goods: washers, dryers, and other large household appliances.
The grounds Whirlpool cited aligned perfectly with the steel argument: that Whirlpool had been harmed by imports and South Korean companies were avoiding tariffs by shipping their washers and dryers from other countries. Once again, the safeguard complaint handed tariff power directly to President Trump. As in the SolarWorld case, the Whirlpool review would provide a model for going after China and levying new tariffs on steel.
Whirlpool was escalating a long-festering trade feud with the South Korean makers Samsung and LG Electronics over their supercheap prices in the US market. The two brands had consumed a 35 percent share of the market in the US, compared with Whirlpool’s 35 percent share. Twice before, Whirlpool had brought trade cases against the two companies, charging that they were illegally dumping washing machines on the US market below their real cost. Each time, Whirlpool had won—but nothing had changed. Another game of whack-a-mole.
The first complaint to the International Trade Commission was filed in 2012. It targeted Samsung and LG washers made in Korea and Mexico, alleging that they were subsidized by the Korean government and dumped on the US market at artificially low prices. A year later, the ITC ruled in Whirlpool’s favor and imposed countervailing duties on washing machines made in Korea and Mexico.
So Samsung and LG moved their production to China, thus evading the new tax. In 2015, imports of washers and dryers from China surged, and Whirlpool filed a second complaint. In early 2017, the first year of the Trump era, the Department of Commerce issued an antidumping order and ordered US Customs to begin collecting taxes at the border on washers arriving from China.
Next, Samsung and LG moved their production from China to Vietnam and Thailand. Frustrated and with a new sheriff in Washington, Whirlpool executives changed tactics. Instead of seeking action against imports from Vietnam and Thailand, Whirlpool filed a “safeguard petition” on May 31, 2017, asking the US government to impose global tariffs on all washer and dryer imports—from everywhere. Five days later, the ITC started its investigation.
The US company argued that the South Korean makers were avoiding the duties by shipping products via other countries, depressing prices and unfairly hurting Whirlpool back in the United States, just as China’s cheap steel prices in international markets hurt prices here, despite a lack of shipments directly from China itself.
And then nothing. The three trade investigations—steel imports, solar panels, washers and dryers—plugged along invisibly during the second half of 2017. Meanwhile, the Trump team prepared for other efforts to topple the trade protocols of the past with even our friendliest allies: Japan, Mexico, Canada, and the European Union.
Some Trump advisors continued to hope he was just bluffing about the tariffs. On July 7, 2017, three months after the Section 232 case on steel began, the New York Times ran a story quoting an advisor to the Trump campaign, Stephen Moore, a Heritage Foundation economist, as saying “If he actually pulls the trigger, it could be highly disruptive to world trade. It’s not even going to really work in terms of helping American workers.”
As the president likes to point out, economists are usually wrong.
A month later, President Trump took a fourth significant step toward imposing the Trump tariffs. On August 14, he signed an executive memorandum instructing US trade representative Robert Lighthizer to look into launching an investigation into allegations that China was stealing US intellectual property.
A signing ceremony—for the rather mundane act of requesting an investigation—was set up at three that afternoon in the Diplomatic Reception Room of the White House. Even the Fake News media dutifully reported it, including the New York Times and the Washington Post. President Trump made the most of it. “The theft of intellectual property by foreign countries costs our nation millions of jobs and billions and billions of dollars each and every year,” he declared as he scribbled his huge, crowded signature with a black Sharpie at the bottom of the executive memo. “For too long, this wealth has been drained from our country while Washington has done nothing. They have never done anything about it. But Washington will turn a blind eye no longer.”
He added that “we will protect forgotten Americans who have been left behind by a global trade system that has failed to look—and I mean look—out for their interests. They have not been looking out at all.”
On a roll now, he went for a big finish, all teleprompter. “We will safeguard the copyrights, patents, trademarks, trade secrets, and other intellectual property that is so vital to our security and to our prosperity. We will uphold our values, we will defend our workers, and we will protect the innovations, creations, and inventions that power our magnificent country.”
It was a great moment for a president in his first year, and he had gone through a very rough few months. His efforts to abolish Obamacare had foundered on a defection of several US senators from his own party. Now he was taking a big step toward keeping a founding promise of his campaign and his presidency.
Though the signing ceremony in August 2017 elicited little coverage of the actual policy move, the next action the president took, five months later, would unleash an avalanche of media histrionics and waves of new opposition and outrage.
On January 22, 2018, he announced tariffs on all international imports of solar panels and modules, washing machines, and dryers. In solar panels, he imposed a levy of 30 percent on the price of all imported solar cells and modules in the first year, declining by 5 percentage points in each of the next four years. In white goods, he slapped a 20 percent tariff on the first 1.2 million washers imported into the United States and a 50 percent tariff on everything over that, plus a 50 percent tariff on washer parts.
Whirlpool’s CEO was thrilled, putting out a statement celebrating “a victory for workers and consumers alike.” From most other quarters, though, oh, the agony. “A great loss for American consumers and workers,” said Samsung.
The requisite cascade of concerned commenters intoned soberly about the adverse impacts the move would cause. China’s minister of commerce called the Trump move “an abuse.” Mexico, which exports more than a billion dollars’ worth of Samsung washing machines and other brands to the United States per year, vowed to use “all legal resources available” to fight the new tariffs.
South Korea’s trade minister said they were “excessive and a clear violation” of world trade rules; he vowed to file a complaint with the World Trade Organization. Two days after the Trump tariffs were unveiled, the country did so. It took the WTO sixteen months to rule on the case, and on May 6, 2019, the United States lifted the antidumping and countervailing duties on imports of washers from South Korea.
Special interests weighed in, too. Howard Crystal, an attorney for the Center for Biological Diversity, a green nonprofit based in Arizona, solemnly declared, “This reckless decision will threaten tens of thousands of American jobs and hurt our climate.” The Solar Energy Industries Association, the industry’s main trade group, claimed that the tariffs would increase energy costs and put “48,000 to 63,000 American solar industry workers out of a job this year.” That would wipe out up to one-quarter of the solar industry’s 250,000 jobs.
Devastating. And it never happened.
In fact, the job decline in solar energy was fewer than 8,000 jobs, or just 3.2 percent, in the year after the new 30 percent tariff went into place. The year after that, in 2019, the solar industry was back up to 249,983 jobs, 17 shy of the 2017 level. So the Trump tariffs led to a net decline in solar energy–related jobs that amounted to 0.1 percent. It was a small price to pay to begin taking back some rope in our tug-of-war with the Chinese. These numbers come from the Solar Energy Industries Association, whose website trumpets, “Solar Industry Growing at a Record Pace.” It claims that “Solar energy in the United States is booming.”
Yet in December 2019, the very same group put out a doomsday report—which the lib left-wing media called a study—timed for release the week the tariffs were to go up for a federal review. Suddenly the tariffs were devastating again. According to Reuters on December 3, 2019:
The U.S. solar industry warned on Tuesday that the Trump administration’s tariffs on imported panels will cost the United States 62,000 jobs and $19 billion (£14.81 billion) in investment, an estimate the White House dismissed as “fake news.”
It is utterly confounding to me that in the age of social media, the internet, and a wealth of free information accessible to more people on Earth than ever before, it has become harder than ever to divine what is the objective truth, which facts are slanted and which can be trusted, what is news and what is fake news, what is real.
The mainstream media were supposed to be the arbiters of truth, and back in the days of Walter Cronkite, maybe they were almost that. Especially since the election of President Trump, though, they have become part of the problem. A big part.
And what became of Whirlpool and the washing machine industry? The media played up the problems and decidedly mixed results, yet on balance the new tariffs achieved some key intended effects. Imports of foreign-made washing machines to the United States fell by 54 percent from 2017, before the tariff, to mid-2019. Before the tariff, imported machines had come in at a rate of 350,000 washers a month, or 4.2 million per year; by mid-2019, that was down to 160,000 a month, the Wall Street Journal reported.
The paper stopped short of admitting it directly, but the new tariff actually created hundreds of new jobs. Whirlpool hired two hundred more workers for a washer plant in Ohio in anticipation of more sales because of a decline in imports. That also meant more business from Whirlpool for an Ohio supplier of counterbalances for washer door hinges, the paper reported.
Moreover, Samsung and LG opened new plants in the United States directly because of the threat of the tariffs and the imposition of them thereafter. When President Trump first slapped the new tax on the imported white goods, LG instantly threatened job losses; didn’t happen. Rather than retaliate and scrap their plans, LG and Samsung both moved forward—in part because the new Trump tariffs had made it too costly to source all of their US supply from their overseas plants. They still wanted access to our market.
In January 2018, just as President Trump was announcing the new tariffs, Samsung started making washers at an old Caterpillar plant in South Carolina, the Journal reported. The new plant employs more than six hundred workers and was producing a thousand washing machines a day by the spring of 2019. It made better sense to make more boxes here. Score another one for President Trump.
One drawback: the prices of washers and dryers jumped in the months after the new 20 percent surtax took hold. Purchases of washing machines slowed because of the higher prices. That made for more negative headlines about the damage done by the Trump tariffs. Yet a year later, the price hike had faded. In a story in the Times on January 25, 2019, the reporter noted that although “laundry equipment inflation” had peaked at 20 percent in July 2018, by December it was down to just 1.6 percent.
It was a rather ridiculous overabundance of sturm und drang over the Trump tariffs on solar panels and washing machines. The two cases amounted to a gnat on an elephant’s backside in the context of the $20 trillion in commerce that takes place in a year in the United States. They may fall short of doing much to help rebuild US manufacturing might in the solar business and white goods.
Nor was that the real intent of the president’s laying down the new Trump tariffs. Their importance lay in their direction and milestones. For the first time in his new administration, President Trump had found a way to tax imports from China and elsewhere in Asia, swiftly and free of interference from the World Trade Organization, the Democrats in Congress, or his Republican colleagues in the Senate.
On his first foray into tariffs, President Trump had made progress in debunking the establishment canon that had dominated US policy for decades. He had defied the battering and pleading of all the special interests feeding at the free-trade trough: the gray-head leaders of his own party who had never stepped up and their Dem counterparts; big labor and big business; economists in government, corporations, and academia.
Virtually everyone said it was unwise to try and impossible to achieve—except a few loud voices from people who knew the destruction going on and kept yelling about it because no one was listening to them. They included Peter Navarro, Michael Pillsbury, Gordon Chang, and myself. And Donald Trump.
We bore the curse of a free-trade Cassandra. The priestess of Apollo from Greek mythology often is misrepresented as an ancient Chicken Little who wrongly thought the sky was falling. Her real curse was that she foresaw the truth that we were doomed and no one would believe her.
President Trump had taken an important first step in penalizing China directly for its underhanded tactics and predatory pricing. And he was just getting started.