The conservative backlash to Trump’s solar tariffs begins

Source: By Dino Grandoni, Washington Post • Posted: Thursday, January 25, 2018

President Trump imposed tariffs on imported residential washing machines and solar powered products on Jan. 23. (The Washington Post)

The U.S. solar industry was finally dealt a blow this week by the Trump administration after it was spared from having key breaks ended in the GOP tax overhaul and the dulling of its competitive edge in a recent Energy Department proposal. It took the form of a tariff.

On Monday, the administration announced it would impose a 30 percent tax on imported solar panels, before falling to half that in the fourth year after taking effect.

The usual suspects — environmentalists, along with their Democratic allies — cried foul, bemoaning yet another twist of the screw from Trump restricting the development of renewable energy.

But another set of Washington interests was up in arms as well. Representatives from a Who’s Who of conservative organizations — the Heritage Foundation, the R Street Institute and the American Legislative Exchange Council — have voiced opposition to the new solar tariffs, too.

“Solar has long had strong bipartisan support because it powers hundreds of thousands of American jobs, gives consumers choice, and helps keep energy prices down,” said Abigail Ross Hopper, president and chief executive of the Solar Energy Industries Association, the main lobby shop in Washington for the solar industry.

That said, she added: “This trade case brought together an even broader coalition of conservatives who oppose the government inserting itself into the market.”

“Here at the Heritage Foundation,” the think tank’s Tori Whiting told an audience Tuesday, “we believe that trade policy, through specific cases or more generally, should not be about tipping the scale toward one American industry or interest group over another.”

The solar lobby has not always had Heritage as a friend — previously arguing against tax credits meant to encourage solar energy installation.

Trump’s announcement this week that he would impose a tax on certain solar equipment —  Trump also decided to tax the first 1.2 million washing machines imported each year by 20 percent — is arguably the most significant protectionist action Trump has taken during his 12 months in office. He was elected promising to crack down on unfair trade practices, especially with China, but his administration has so far been more rhetoric than action in this arena. (Expect more red meat from U.S. trade officials in Davos this week: read my colleague Tory Newmyer in The Finance 202 for more on the subject.)

But the choice was one that happened to fall into the president’s lap. In October, the U.S. International Trade Commission concluded imports hurt domestic solar-panel manufacturers — namely, two bankrupt manufacturers, Suniva and SolarWorld — kicking the decision as to whether to impose a tariff on overseas solar panels to the president.

Green or not, the solar business is still a business. True to their core, traditional free-trade Republicans do not want to see international commerce encumbered by tariffs or other trade barriers.

However, analysts say the short-term tariff will do little to buoy Suniva’s or SolarWorld’s fortunes, or to encourage more domestic panel factories. “Anyone expecting a U.S. manufacturing renaissance as a result of these tariffs is set to be disappointed,” said Hugh Bromley, a solar analyst at Bloomberg New Energy Finance. “A tariff lasting only four years and ratcheting down quickly is unlikely to attract any manufacturing investment that was not going to occur anyway.”

Instead, other solar energy users — everyone from utilities with acres of solar arrays and homeowners with a few panels on their roofs — could see costs creep up as imported panels become more expensive.

Roger Garbey, from the Goldin Solar company, installs a solar panel system on the roof of a Florida home a day after the Trump administration announced it will impose duties of as much as 30 percent on solar equipment made abroad. (Joe Raedle/Getty Images)

Free-trade conservatives are worried about the precedent the president has set. Between 1974 and 2016, presidents have put up trade barriers in only 19 of the 40 cases the ITC placed before them, according to the Peterson Institute.

Now, manufacturers in other industries may petition the ITC.

“There’s a real chance that this opens the floodgates,” Chad Bown, a trade expert at the Peterson Institute, toldThe Washington Post’s David J. Lynch.

After Trump reportedly told senior staff to “bring me some tariffs” in August, “I was kind of tipped off here that this was going to be the first case the president had to use his discretion to impose tariffs,” Clark Packard, trade policy counsel at the R Street Institute, said at the Heritage Foundation event.

Compounding the concern among conservatives is that free-trade groups made an honest-to-goodness effort to change the president’s mind.

In October, 10 groups, including ALEC, R Street and the Competitive Enterprise Institute, wrote to Trump to ask him to reject solar tariffs. Jason Saine, a Republican state representative in North Carolina and ALEC’s national chairman, followed up with a letter this month arguing “[i]t is important to conservatives across the country to make sure that our trade is free and fair.”

In the past five months, the Wall Street Journal’s editorial board wrote twice in opposition to the tariffs. The solar industry even recruited one of Trump’s favorite Fox News personalities, Sean Hannity, to do a voice-over for a radio spot that ran in South Carolina during the president’s trip there in October.

Though the ultimate tariff was not as bad as some solar companies feared, all that lobbying fell on deaf ears.

Now, free-trade advocates are worried about the tariff reviving not domestic panel manufacturing, but lobbying for more solar tax credits.

“If we upend this by artificially raising prices with trade protectionism,” R Street’s Packard said, “the calls for more domestic subsidies will certainly increase.”

Yesterday, Gary Cohn, Trump’s top economic adviser, found himself defending his boss’s decision during the White House press brieging. “The president made a ruling that will make the U.S. competitive and grow our economy,” he said.

Cohn said that Trump allowed an “enormous amount of latitude” in the solar panel decision, the full details of which have not been announced.

“We’re protecting our panel makers because we do make panels here in the U.S.,” he added.

One place where there did not appear to be much lamenting was among Republicans in Congress. Sen. Ben Sasse (R-Neb.), who is often critical of Trump, was one of the few to issue a statement against the solar decision.

“Here’s something Republicans used to understand: Tariffs are taxes on families,” Sasse said. “Moms and dads shopping on a budget for a new washing machine will pay for this — not big companies. You don’t fix eight years of bad energy policy with bad trade policy.”