Trade policies could spark another Depression — economists

Source: Christa Marshall, E&E News reporter • Posted: Monday, May 7, 2018

More than 1,100 economists, including multiple Nobel Memorial Prize winners, warned President Trump and Congress yesterday that protectionist trade policies on solar panels, vehicles, aluminum, steel and other products could set the United States up for another Great Depression.

In an open letter, the economists said Americans “paid the price” in 1930, when similar warnings were ignored about the protectionist Smoot-Hawley Tariff Act that preceded the financial crash. The law raised tariffs on more than 20,000 imported goods.

“The undersigned economists and teachers of economics strongly urge you not to repeat that mistake,” said the letter, which was signed by 15 winners of the Nobel Memorial Prize in Economic Sciences and economic advisers in the administrations of Presidents George H.W. Bush, George W. Bush, Clinton and Obama. The National Taxpayers Union led the effort to send the letter to members of Congress and the White House.

“Today, Americans face a host of new protectionist activity, including threats to withdraw from trade agreements, misguided calls for new tariffs in response to trade imbalances, and the imposition of tariffs on washing machines, solar components, and even steel and aluminum used by U.S. manufacturers,” they wrote.

The economists said the global economy is certainly different now than it was in the 1930s, particularly in the sense that trade is more important to the U.S. economy than it was then.

But they released text from a 1930 economist letter that they said still holds true. The earlier document said the vast majority of farmers would clearly “lose.”

The White House did not respond to a request for comment.

Administration officials, including Treasury Secretary Steven Mnuchin, traveled to China this week to hash out trade disputes. This morning, China’s official news agency Xinhua said “relatively big differences” remain on several issues after the meetings.

Since January, Trump has taken multiple trade actions with ripple effects across the energy sector, starting with a 30 percent tariff on imported solar cells and modules and withdrawal from the Trans-Pacific Partnership.

In March, the Office of the U.S. Trade Representative announceda list of about $50 billion in products slated for tariffs, including batteries and nuclear reactors. At the time, Trump accused China of engaging in “tremendous intellectual property theft.”

The action prompted China to take retaliatory measures against U.S. soybeans.

Yesterday, Sen. Chuck Grassley (R-Iowa) released a statement saying that new reports of China halting all purchases of U.S. soybeans could cause severe economic damage.

“China is the largest consumer of U.S. soybeans, buying up nearly 60 percent of our soybean exports. If that market closes, it could be devastating for local communities across the Midwest,” Grassley said.

Earlier this week, the administration delayed a decision about whether to impose tariffs on most steel and aluminum imports — which could affect manufacturers of everything from pipelines to solar racking systems. The administration announced a monthlong extension of tariff exemptions on aluminum and steel for Canada, Mexico and the European Union.

The Solar Energy Industries Association has projected that the solar tariffs alone could lead to the loss of 23,000 jobs this year.

It remains unclear whether the prediction will come true. SEIA said today it is collecting anecdotes and cited the case of Cypress Creek Renewables, which recently canceled $1.5 billion in planned investments and stalled a third of their planned construction for 2018.

“In all we’ve heard from 20 companies, most of which asked to be anonymous, that have canceled projects, laid off workers or shut their doors,” SEIA said.

There have been some signs of life in solar manufacturing since the tariffs, which administration officials have been quick to hail. In January, Chinese solar manufacturer JinkoSolar Holding Co. Ltd. said it was planning to open a solar manufacturing facility in the United States and tied the decision to tariffs

SunPower Corp. also announced plans to buy SolarWorld Americas in a maneuver to get around Trump’s tariffs (E&E News PM, April 18).

White House deputy press secretary Lindsay Walters called that “further proof that the president’s trade policies are bringing investment back to the United States.”

Yet SEIA said additional manufacturing capacity, if it comes to pass, “still would not be nearly enough to meet the vast majority of U.S. demand.”

Last month, a bipartisan group of House lawmakers introduced the first congressional bill to overturn Trump’s solar tariffs (E&E News PM, April 19).