Yesterday, the U.S. International Trade Commission made a final arbitration that have identified the solar panels and cells and other modules imported from China as a category of goods that make substantial damage to related industries in the United States. The U.S. anti-dumping and countervailing duty ("dual") tariff will be levied on such products.[i]
‘Anti-dumping
Duty’ is protectionist tariff that a
domestic government imposes on foreign imports that it believes are priced
below fair market value. In the United States, anti-dumping duties are imposed by the Department
of Commerce and often exceed 100%. They come into play when a foreign company
is selling an item significantly below the price at which it is being produced.[ii]
As we learned this week from the textbook, when we tax the import goods, the solar panels and cells, since the amount that we import is remarkable we can assume U.S. is a large import country, the supply of solar products in China will decrease because of the higher cost. The world’s price will increase. The solar producer in USA will produce more solar products to get profit while the consumption decreases. In this way this anti-dumping duties protect the Home country’s polar industry so that save domestic jobs. In addition, the reduction in the amount of imports led to the reduction of foreign exchange payments which can also improve the U.S. international trade balance of payments. However, a tariff war could break out if China retaliates for the tariffs.
As we learned this week from the textbook, when we tax the import goods, the solar panels and cells, since the amount that we import is remarkable we can assume U.S. is a large import country, the supply of solar products in China will decrease because of the higher cost. The world’s price will increase. The solar producer in USA will produce more solar products to get profit while the consumption decreases. In this way this anti-dumping duties protect the Home country’s polar industry so that save domestic jobs. In addition, the reduction in the amount of imports led to the reduction of foreign exchange payments which can also improve the U.S. international trade balance of payments. However, a tariff war could break out if China retaliates for the tariffs.
This comment has been removed by the author.
ReplyDeleteWhat you described in the last sentence of your middle paragraph is called predatory pricing. One hypothetical example of this is a gas station, one on one side of a street and another on the other side. If one gas station prices its gas significantly below the cost of producing, refining and transporting it, and the other does not, the station pricing below cost shuts down the other gas station and takes all the profits while monopolizing the nearby area. The fact that predatory pricing is illegal in the U.S. should be enough to fend off countries from dumping products priced below cost into the U.S., but when it is not enough, tariffs often result. In this case where the U.S. imposed a tariff on Chinese solar products, like any other tariffs, the U.S. tariff will cause the U.S. to effectively subsidize the imported Chinese solar products. You're right about the correlation between the reduction in imports and reduction in foreign exchange payments because the reduction in foreign exchange payments may help prevent inflation in the U.S..
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteI agree that since the cost of Chinese products exporting to the U.S. is lower in China,comparing to the cost of the same product in the U.S., so the U.S. put tariff on Chinese exporting products. In addition, the other reason is that the U.S. currency was high, in the past few years, 1 dollar is equal to more than 8 RMB. This means you can use 1 dollor to buy 8 RMB Chinese product. And now, only 6.29 RMB.
ReplyDeleteAs what you said in your post, this protection tariff, anti-dumping duty, will protect the U.S. industry. I remember that there was one post I wrote before about the tomato war between the U.S. and Mexico. It seems like the same things.
Tariff protect the domestic industry, and government get revenue from it. It looks like a good deal. However, this tariff hurts consumers. Because if consumers buy imported product with a tariff or domestic product with a higher cost, consumers need to pay more, then maybe they will reduce other goods that may be not essential to their daily life. If "other goods" are domestic products, domestic industry get hurt, worker get hurt, consuming get worse.
It is well known that China is dominating the solar panel industry with its very cheap products and US firms cannot compete. In cases like this, to protect the US solar power industry it may be beneficial to tariff these goods. Since solar panels are not an essential good for a typical American consumer it will not negatively affect them the same was a tariff on shoes would (See my most recent blog).
ReplyDelete