South Korea and China protested on Tuesday against U.S. President Donald Trump slapping steep import tariffs on washing machines and solar panels in a move that stirred fears in Asia of more protectionist measures coming out of Washington.
For all his rhetoric to win votes, Trump’s actions on trade during his first year had been less alarming than many outside the country had feared – until now.
“It shows that the U.S. administration, after taking its time, it’s now indeed starting to roll out measures restricting trade with the idea of living up to the promises made during the electoral campaign,” said Louis Kuijs, head of Asia economics at global consultancy Oxford Economics, in Hong Kong.
“This could very well be just one step of many,” said Kuijs, predicting steel and aluminium imports could be on Washington’s target list.
The United States’ stance has put a cloud over global trade at a time when its revival has fueled hopes for a stronger world economy. But, at least, economists believe the United States will avoid taking measures that could impact U.S. companies global supply chains, particularly for cars and electronics.
The tariffs on washing machines, meantime, have dealt a heavy blow to South Korea’s Samsung Electronics and LG Electronics.
Together they ship between 2.5 million to 3 million washing machines annually to the United States, with sales of around $1 billion, and they hold a quarter of a U.S. market that has been dominated by Whirlpool and General Electric Co.
South Korea’s trade minister Kim Hyun-chong said the new U.S. tariffs violated World Trade Organisation rules.
“The United States has opted for measures that put political considerations ahead of international standards,” Kim told a meeting of industry officials.
“The government will actively respond to the spread of protectionist measures to defend national interests.”
China, the world’s biggest solar panel producer branded the move an “overreaction” that would harm the global trade environment for affected products.
“The U.S.’s decision … is an abuse of trade remedy measures, and China expresses strong dissatisfaction regarding this,” Wang Hejun, the head of the commerce ministry’s Trade Remedy and Investigation Bureau, said in a statement on its microblog.
“China will work with other WTO members to resolutely defend its legitimate interests in response to the erroneous U.S. decision.”
Mexico said it would use legal means to ensure Washington met international obligations, pointing to compensation envisaged under the North American Free Trade Agreement.
India has recently re-opened a U.S. dispute, alleging Washington has failed to comply with a ruling on solar power.
Vietnam has also challenged U.S. anti-dumping measures against exports of fish fillets, according to a WTO filing.
‘Security and trade linked’
The decisions in the two “Section 201” safeguard cases for washing machines and solar cells came after the U.S. International Trade Commission (ITC) found that imported products were “a substantial cause of serious injury to domestic manufacturers.”
The tariffs on washing machines exceeded the harshest recommendations from ITC members, while the solar tariffs were lower than domestic producers had hoped for.
Trump ignored a recommendation from the ITC to exclude South Korean-produced washing machines from LG from the tariffs.
Washington will impose a 20 percent tariff on the first 1.2 million imported large residential washers in the first year, and a 50 percent tariff on additional imports. The tariffs decline to 16 percent and 40 percent respectively in the third year.
A 30 percent tariff will be imposed on imported solar cells and modules in the first year, with the tariffs declining to 15 percent by the fourth year. The tariff allows 2.5 gigawatts of unassembled solar cells to be imported tariff-free in each year.
“After a year’s preparation, Trump is ready to take action to address the huge trade deficit with China and get even,” said Zhang Yi, chief economist at Capital Securities in Beijing.
“Last year, we thought nothing would happen, but now China should not have any illusion about it. If the U.S is using Section 201 to hit you, they will hit hard,” Zhang added.
Some analysts in Seoul believed Trump was intensifying pressure on its Asian ally to rely more on him when dealing with North Korea, while gaining leverage renegotiating a bilateral free trade pact that Trump has previously labeled as “horrible.”
“Security and trade are linked to each other under Trump,” said Choi Won-mog, an international trade law expert at Ewha University.
A filing published by the WTO on Jan. 12 showed Seoul had already asked for authorisation to impose annual trade sanctions worth at least $711 million on the United States, in response to the dispute over washing machines.
South Korea also asked for permission to impose an open-ended amount of trade sanctions if Washington broke the same rules again with regard to other products.
Seoul has already demanded compensation because the United States had failed to meet a Dec. 26 deadline to comply with a ruling against duties of up to 82 percent it had earlier imposed on appliances made by Samsung Electronics, LG Electronics and Daewoo Electronics.
Both Samsung Electronics and LG Electronics expressed concern over U.S. tariffs, saying they would hurt American consumers and jobs.
LG Electronics shares ended up 0.5 percent after an earlier plunge, while Samsung Electronics was up 1.9 percent in line with the South Korean market’s 1.4 percent gain.
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