Subsidizing Your Own Competitors

from Maudlin Economics,

Tariffs on Your Roof

The US is about to fire another salvo in the international trade war, and this one may actually make sense. That’s because the US government will, if President Trump approves, help an industry it almost destroyed a few years ago.

Is it “protectionism” to restore the balance that existed before government intervened? Maybe not. But stranger yet, this one puts the Trump administration and environmentalist groups on the same side. They say politics makes strange bedfellows. Trade policy does too… and it points to an investment trend you should follow.

Two weeks ago, I wrote about free trade and manufacturing jobs. Last week’s topic was renewable energy. Today, we have all three. As you may have noticed in your neighborhood, rooftop solar panels are gaining popularity. People and businesses like them because they save money and help the environment at the same time. Installing those panels is a growing business. Making them isn’t, at least for American companies. They have been unable to compete with low-cost panels imported from China. In September, the US International Trade Commission ruled that US solar panel manufacturers had been seriously injured by foreign competition. The decision came in response to a complaint filed by bankrupt Georgia-based company Suniva. In an October 31 follow-up ruling, the ITC recommended President Trump impose up to 35% tariffs on imported solar panels. The president will make a final decision. We don’t know what Trump will do, but the more interesting part is why Chinese solar panels have this cost advantage. It turns out, the US government actually paid the Chinese huge subsidies to make the same solar panels it now says are unfair competition. Weird? Yes. And it gets weirder.

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