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Sunday, 04 February 2018 14:14

Higher prices, minimal jobs expected from tariffs on washing machines, solar panels

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 President Trump’s recent decision to impose tariffs on imported washing machines and solar panels will raise prices for consumers and eliminate more jobs than they create, experts say.

Two companies with ties to Michigan — Whirlpool Corp. and Suniva Inc. — were successful in arguing the need for the tariffs and will likely benefit from the policy. The tariffs on imports are up to 50 percent on large residential washing machines and up to 30 percent on solar cells and modules, and phase out in three and four years, respectively. The Trump administration says tariffs are necessary to spur U.S.-based manufacturing and to combat low prices on imports from South Korea and China.

While Whirlpool (NYSE: WHR) said the policy will increase manufacturing jobs at the company’s plants in Ohio (where 200 jobs were immediately added), Kentucky, Tennessee and South Carolina, it’s unclear whether the benefits will extend to Michigan. The company’s global headquarters are in Benton Harbor.

“While there is not a direct short-term impact to its Michigan headquarters operations, Whirlpool will move forward with investments in innovative new products, better positioning itself for long-term growth,” said Whirlpool spokesperson Patrick O’Connor.

Suniva — which is owned by a Chinese company, and filed for bankruptcy protection in April 2017 — could not be reached for comment on whether the company will reopen a panel manufacturing plant in Saginaw that closed in March 2017.

However, trade experts say history indicates the tariff approach will likely be harmful overall for U.S. consumers. In the case of solar panels, trade groups expect the loss of about 23,000 jobs nationwide this year and that the costs of utility-scale and residential solar projects will increase.

“It’s going to raise prices demonstrably. That’s the whole point, so domestic producers can survive with higher costs,” said Alan Deardorff, a public policy and economics professor at the University of Michigan. “Any normal economic analysis of this says unambiguously that our country — when you add up all the gains and losses — loses from it.”

However, Deardorff adds that the move is part of an “understandable desire to protect workers from being hurt” by overseas competition. 

“The idea is to give industries time to do whatever they need to become more efficient or phase out and shut down without quite as dramatic of a disruption for the people involved,” he said.

The tariffs were recommended by the U.S. International Trade Commission under section 201 of the Trade Act of 1974 after finding U.S. companies were harmed by the cheaper imports. The temporary measures apply to all countries, but were largely targeted at South Korea and China.

SOLAR BOOST UNLIKELY

While the washing machine tariff is likely to be passed on directly to consumers, the U.S. solar sector could lose tens of thousands of jobs, according to industry groups. That’s because the majority of the sector’s 260,000 U.S. jobs are in installation, while manufacturing makes up less than 15 percent of those jobs, according to the Solar Foundation.

Georgia-based Suniva, which initially brought the trade complaint before the ITC, closed its Saginaw manufacturing plant last year and laid off 59 employees because of market pressure from overseas competitors.

Mike Linsea, owner of Shelbyville-based Solar Winds Power Systems LLC in Allegan County, said prices will likely increase minimally for his customers. Solar Winds specializes in installing residential and small-scale solar systems, which Linsea said primarily include U.S.-manufactured panels already because his customers “prefer those.” He also is working off a supply of U.S.-made panels purchased last fall.

“We’re not anticipating too much trouble at our level,” he said, adding that he has a “philosophical problem” with tariffs, which “just breed more tariffs.”

Allan O’Shea, president of CBS Solar in Copemish, a division of Contractors Building Supply Inc., anticipates similar effects. If the tariff were a direct pass-through for customers, costs would increase for them by about 20 cents per watt, or about $60 per panel, he said. 

While the price change might have a short-term, material impact for customers, CBS Solar is adding new technologies to its product that increases panels’ efficiency, O’Shea said.

“Overall, I think it’s going to hurt the solar industry, especially the installers,” he said, adding that companies in the U.S. don’t have the capacity to meet higher manufacturing demand. “I see this as a dime short and an hour late. If anything, it should have been done three years ago.”

Liesl Eichler Clark, president of the Michigan Energy Innovation Business Council, called the tariffs a “middle-of-the-road outcome” whose impact on the sector remains to be seen. She also points out that many installers have been stockpiling product in anticipation of the tariffs. 

“Solar has really been on the uptake,” Eichler Clark said. “It will probably set the industry back a year or two.”

Linsea and O’Shea still expect continued growth in 2018. For Linsea, the bigger uncertainty is around distributed generation tariffs imposed by the state on residents who want to sell their excess solar generation back to the grid. The Michigan Public Service Commission is considering changes to this net metering process that could begin to affect customers in 2019.

“Solar on the residential and small commercial scale continues to grow by leaps and bounds,” Linsea said. “But we still have a long ways to go.”

BROADER IMPACTS

U-M’s Deardorff says the greater concern is that Trump’s actions will spark a broader trade war as more U.S. protections are considered. The affected countries may retaliate against U.S. sectors with large exports, such as soybeans.

“Trump sees our trade deficits as a sign of how much we have lost in international trade,” Deardorff said. “Economists look at it just the opposite. We’re not capable as a country to produce as much as consumers want to buy. Trade barriers won’t change that.” 

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