Saturday, November 23, 2024
In 2018, the Trump Administration imposed a 30% tariff regime on solar panels imported into the United States from China. The rationale was to support US production under an implied “infant industry” rubric. The Administration claimed that these tariffs would protect US solar panel manufacturers from unfair competition, siting Chinese government subsidies of its solar panel industry.
Trump claimed that protecting the industry would encourage domestic production of solar panels. That it would help to reduce trade deficits. And that it would protect and create US jobs.
If these were its objectives, the policy was an unmitigated, almost comical, failure. Domestic panel manufacturers did see modest increases in revenues, although those would have probably been seen even without the tariffs. And whatever increases there might have been, were more than offset by revenue losses from reduced solar panel installations and were well below Trump Administration projections, and more or less in line with the worldwide growth trend
The tariffs did little to impact the market share of imported panels. And while there was clearly a decrease in the number of imported solar panels, the overall trade deficit continued at elevated levels. Finally, the National Renewable Energy Laboratory, an industry research organization, reported that the industry lost over 8,000 jobs in the aftermath of the tariffs.
The net effect of this policy was just as any first-year economics student could easily grasp and explain. The imposition of tariffs raised prices for consumers, reduced demand for the products of the protected industry and resulted in lost jobs.
And this ignores the fact that solar energy, while having its drawbacks, has the potential to be less costly, to make the US energy sector less fragile as well as reducing environmental impacts.
Rather than admit its error, lick its wounds and move on, the Trump Campaign has doubled down on protectionism and proposes a universal 20% tariffs on all imports. We think this is a horrible idea. That it would devastate the economy and the financial markets as well as increase unemployment and hurt manufacturing more broadly.
Over the course of the next week or so, we’ll defend our position on tariffs and protectionism and come up with a list of concrete proposals to support manufacturing in the US.
We hope you’ll join us.
Another boring day on Wall Street. Stocks opened lower, bounced around a little bit before finishing mixed but little changed. Volume was way, way below average and declining stocks exceeded advancers, but not by much.
Like stocks, interest rates finished mixed. Like stocks, they were little changed on the session.
The Case/Shiller Home Price Index came in above expectations on Tuesday. To no one's surprise, houses got even more expensive, increasing in price, on average, by 6.5% over the last twelve months.
The Conference Board’s Consumer Confidence Index came in better than expected and better than last month’s reading. Despite higher housing prices, or perhaps because of them, consumers expect a better economy in the year ahead.
Nothing on today’s economic calendar but NVIDIA, the world’s largest chip maker, will release earnings after the closing bell. Wall Street expects the company earned a bit over $0.64 per share in the 2nd quarter on almost $29 billion in sales.
To put that into perspective, five years ago, NVIDIA reported earnings of $0.03 per share on $2.6 billion in sales. That’s a twenty-fold increase in profits on a tenfold increase in sales. The market is very much focused on the NVIDIA report, and we expect it to move the markets on Thursday, one way or the other, but regardless, hit or miss, NVIDIA is a remarkable success story.
