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U.S. Tariffs, Aimed at China and South Korea, to Hit Targets Worldwide U.S. Tariffs, Aimed at China and South Korea, to Hit Targets Worldwide
(about 7 hours later)
DAVOS, Switzerland — The Trump administration is taking direct aim at Chinese solar panels and South Korean washing machines with new tariffs. The impact, however, will be felt more broadly. DAVOS, Switzerland — When the Trump administration unveiled tariffs on imports of solar panels and washing machines — industries dominated by Chinese and South Korean businesses — they deliberately applied them to products from around the world.
The tariffs unveiled on Monday will apply to imports of washing machines and solar energy cells and panels from around the world, not just from China and South Korea. That’s deliberate: United States trade officials say Chinese and South Korean companies have set up factories in other countries to avoid existing American tariffs. The move on Monday, in the eyes of United States trade officials, reflected the complexities of modern global trade. Though companies from just two countries account for the lion’s share of both sectors, those firms have set up factories in multiple locations across national borders.
That means factories and workers in multiple countries will be affected, showing how difficult it can be to hit specific targets in the complicated world of modern trade. As a result, the tariffs will affect factories and workers in a variety of countries, reflecting the globalized supply chains and byzantine corporate ownership structures that are at the heart of many ubiquitous products.
Just to illustrate the complexities, Suniva, one of the American solar companies that had sought the tariffs, filed for bankruptcy protection last year, citing the effects of Chinese imports. But the majority owner of Suniva is itself Chinese, and the company’s American bankruptcy trustee supported the trade litigation over the objections of the Chinese owners. The solar panel case in particular has been a case study in that complexity. Suniva, one of the American solar companies that had sought the tariffs, filed for bankruptcy protection last year, citing the effects of Chinese imports. But the majority owner of Suniva is itself Chinese, and the company’s American bankruptcy trustee supported the trade litigation over the objections of the Chinese owners.
China and South Korea could take their complaints to the World Trade Organization, which settles trade disputes. Under its obligations to the international body, the United States would have to back off if the organization ruled against it. Here is a rundown of the wide-ranging impact the new tariffs may have.
If Washington did not adhere to such a ruling, the World Trade Organization could authorize other countries to set similar trade limits. That could raise the question of whether the United States accepts the organization’s decisions. Robert E. Lighthizer, the United States trade representative, has argued for years that such decisions should, essentially, be advisory. Possibly — but not without costs for all the countries involved.
China and South Korea have leverage of their own, as they are big importers of American-made machinery and agricultural products. China and South Korea could take their complaints to the World Trade Organization, which arbitrates international trade disputes.
China, in particular, has long been a big buyer of soybeans and other crops from states that supported Mr. Trump in the 2016 election. And as an enormous consumer of the world’s goods, it could easily punish American companies that have international competitors, for instance by choosing Airbus planes over Boeing’s or punishing General Motors while leaving Volkswagen alone. If the W.T.O. sided with those countries, the United States would be under considerable pressure to back down. If it did not, there would be two major sets of consequences. For one, the World Trade Organization could greenlight other countries’ setting similar trade limits. More broadly, it would raise the question of whether the United States accepts the organization’s decisions all — Robert E. Lighthizer, the United States trade representative, has argued for years that such decisions should, essentially, be advisory.
But a trade fight would be painful. Both China and South Korea export a lot more to the United States than they import, meaning higher tariffs could hit their economies harder. The United States market has long been very attractive to foreign companies, and not just for its large and affluent set of consumers. Its tariffs on imports are much lower than those of most other countries, and it also has relatively low sales taxes. But President Trump has regularly questioned whether existing free trade agreements are in the best interests of the country, making it possible that such favorable terms may erode.
The United States accuses China of swamping the market with artificially cheap, subsidized solar panels. But increasingly, those panels come from elsewhere. Still, China and South Korea have leverage of their own. They are big importers of American-made machinery and agricultural products, and China, in particular, has long been a big buyer of soybeans and other crops from states that supported Mr. Trump in the 2016 election.
Indeed, as an enormous consumer of all types of global goods, China could also easily punish American companies by opting to buy from international competitors. For instance, it could opt for Airbus planes over Boeing’s or crack down on General Motors while leaving Volkswagen alone.
A trade fight would, however, be painful. Both China and South Korea export a lot more to the United States than they import, meaning higher tariffs could hit their economies harder.
The United States accuses China of swamping the market with artificially cheap, subsidized solar panels. But increasingly, those panels come from elsewhere. Steep tariffs imposed in 2012 on solar panels imported from China have made it cheaper for Chinese companies to assemble the panels in factories elsewhere before shipping them to the United States.
Countries like Malaysia and South Korea now account for most of the United States’ solar imports, according to data from Global Trade Atlas, a database maintained by the research firm IHS Markit.Countries like Malaysia and South Korea now account for most of the United States’ solar imports, according to data from Global Trade Atlas, a database maintained by the research firm IHS Markit.
That is in part because an earlier round of American tariffs specifically targeting Chinese solar panels prompted those companies to open factories elsewhere. JA Solar and JinkoSolar, for example, have opened factories in Malaysia. Chinese companies still do much of their research and development at home, before shipping materials to other countries for assembly. Completed panels are then shipped to the United States. Chinese companies like JA Solar and JinkoSolar, for example, have opened factories in Malaysia, though most such businesses still do much of their research and development at home.
Still, spreading the manufacturing base also means other countries may face job losses and other hardships thanks to United States tariffs, which could galvanize opposition to the move. The broad manufacturing base means other countries may face job losses and other hardships in the face of the United States tariffs, which could galvanize opposition to the president’s action.
American companies in those industries have themselves also set up shop in places like Southeast Asia, said Rajiv Biswas, an economist at IHS Markit. “Due to the increasing integration of the Asian manufacturing supply chain,” he said in an email, “the impact of higher U.S. tariffs on solar panels and washing machines could have wider transmission effects beyond South Korea and China.” American companies also manufacture some of their panels in Southeast Asia before importing some of them back into the United States. But their products tend to use a different technology, known as thin-film solar panels, which are not covered by the latest tariffs.
President Trump is set to speak to world leaders gathered this week at the World Economic Forum in Davos, Switzerland, where he could drop hints of whether the United States has more trade barriers to announce.President Trump is set to speak to world leaders gathered this week at the World Economic Forum in Davos, Switzerland, where he could drop hints of whether the United States has more trade barriers to announce.
Washington could take action on aluminum or steel imports, two categories that have long vexed previous presidential administrations. It is also exploring a major trade action against China focused on intellectual property. “China’s regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights,” Mr. Lighthizer’s office said as part of a broader report last week, suggesting possible strong action. Washington could take action on aluminum or steel imports, two categories that have vexed previous presidential administrations. It is also exploring a major trade action against China focused on intellectual property.
“China’s regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights,” Mr. Lighthizer’s office said as part of a broader report last week, suggesting possible strong action.
The Trump administration’s move nevertheless leaves room for negotiation.The Trump administration’s move nevertheless leaves room for negotiation.
The tariffs announced on Monday were not as high as American companies had requested. With washing machines, for example, higher tariffs would not kick in until the United States imports 1.2 million finished washers. The tariffs announced on Monday on solar panels were not as high as American companies had requested. And with washing machines, the tariffs were somewhat higher than requested, but the administration said they would not kick in until the United States imports 1.2 million washers.
He Weiwen, a former Chinese Commerce Ministry official who is now an influential trade policy researcher in Beijing, said Chinese policymakers had reacted with “strong dissatisfaction” to the tariffs. But he predicted that China’s response would at first be cautious, as officials wait to see how strong the other actions will be. He Weiwen, a former Chinese Commerce Ministry official who is now an influential trade policy researcher in Beijing, said Chinese policymakers had reacted with “strong dissatisfaction” to the tariffs. But he predicted that China’s response would at first be cautious, as officials wait to see how strong the other American actions will be.
“We cannot expand to an overall trade war,” he added.“We cannot expand to an overall trade war,” he added.