Trump's tariffs are already backfiring

Before steel and aluminum tariffs alienated our allies, before President Trump suggested car imports threatened our "national security," before that 1,000-plus-item list of Chinese goods targeted for new tariffs, there were washing machines.

Yes, washing machines.

It seems almost quaint today, but the U.S. washer industry was one of the first sectors that Trump decided to rescue through an aggressive, no-holds-barred tariff. And now that a few months have passed, the industry offers a useful preview for how Trump's tough-on-trade strategy can backfire for many of the U.S. companies, consumers and workers he wants to help.

Curiously, foreign washing machines weren't always seen as the enemy. Once upon a time, the U.S. government believed rising washer imports were a good thing for the economy.

At least, that's what U.S. antitrust authorities suggested back in 2006, when they let American companies Whirlpool and Maytag merge. At the time, the combined company controlled about half the domestic washer market, according to market research firm TraQline.

Normally, this level of market concentration would be a red flag. But the Justice Department said it wasn't worried, in part because Whirlpool's newer South Korean rivals, LG and Samsung , "have quickly established themselves in recent years." These imports, Justice officials said, would help keep Whirlpool's U.S. market power in check.

That is, in fact, what happened, much to Whirlpool's dismay. Over the next dozen years, Whirlpool's market share shrank faster than a cotton T-shirt. It's now down to a little more than a third.

Samsung and LG said they've gained ground because they're giving consumers what they want, with their focus on high-efficiency front-loaders with fancy new features, such as the ability to wash two loads simultaneously.

Whirlpool, which runs the world's largest washing machine factory here in Clyde, Ohil strongly disagrees. It accused the Korean companies of playing dirty, "dumping" their machines below cost in the U.S. market and receiving unfair subsidies from the Korean government.

Then-President Barack Obama's Commerce Department took Whirlpool's side. In 2013, the administration issued anti-dumping and countervailing tariffs on imported washers from South Korea and Mexico. Both companies subsequently moved production to China. So Whirlpool filed another complaint, and the U.S. government announced another round of tariffs, this time on Chinese washers. LG and Samsung moved production again, this time to Thailand and Vietnam.

Then came Trump, who looked exactly like the kind of uncompromising "fair trade" champion Whirlpool had been yearning for. Clyde's surrounding county voted for Trump by 23 points in 2016.

And at first, it seemed their electoral choice paid off.

In January, Trump announced steep worldwide tariffs on washers (and solar panels, which got a lot more attention).

Perhaps seeing the writing on the wall, a few months before this, both Korean companies announced plans to open washer factories in the United States. States and counties desperate for new manufacturing jobs have showered them with tax credits, grants and other goodies.

You know, the same kinds of generous government subsidies Whirlpool had accused them of receiving back in South Korea.

Nonetheless, Whirlpool and the Trump administration declared victory: for American firms, American workers and even American consumers.

But so far, the data suggest consumers have been hung out to dry.

This spring, laundry equipment prices skyrocketed 17 percent, the biggest increase on record. It's hard to see how higher prices expand shoppers' choices. When you aggregate all those price increases across the 10 million washers sold annually in the United States, consumers will collectively pay hundreds of thousands of dollars per year for each job supposedly created or saved. Which is many multiples of what factory workers typically earn.

And it's not even clear how safe their jobs are at this point, given the rest of Trump's trade agenda. After all, his tariffs didn't stop with washing machines.

Those metal tariffs have left steel prices more than 50 percent higher in the United States than they are in China or Europe. This is bad news for U.S. companies that purchase steel − including to manufacture washing machines, which are essentially big steel boxes.

Perhaps worse, our furious trading partners are now striking back by placing new tariffs on U.S. goods. Among the products that both the European Union and Canada have targeted for retaliation?

You guessed it: U.S.-made washing machines.

Ohio factory workers thought they'd be big winners from Trump's unorthodox trade approach. But when all's said and done, it could be, at best, a wash.

Catherine Rampell's column is distributed by the Washington Post Writers Group.

 

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