Donald Trump: The fuzzy logic behind Donald Trump's new washing machine tariff

by Andy Mukherjee

President Donald Trump's washer tariffs have a rather fuzzy logic.

The George W Bush administration slapped safeguard duties on cotton trousers, shirts and underwear imported from China in 2005. Barack Obama singled out Chinese-made car tires for similar punitive tariffs in September 2009. What makes Trump's action against imported solar panels and washing machines unusual is that it isn't aimed at a particular country: It's a global measure.

The last time the US used this drastic anti-trade device was 16 years ago. In March 2002, Bush imposed additional levies of up to 30 percent on some imported steel products for three years.

The World Trade Organization held America's action to be illegal. While the European Union was threatening to retaliate across a wide range of goods, including photocopiers and motorboats, it was probably orange juice that got Bush to back down in late 2003. As he prepared for his 2004 reelection bid, voters in Florida -- the same folks who secured a close win for him against Al Gore in 2000 -- were more important than steel workers in West Virginia.

You can count on the Chinese and the South Koreans to remember this history lesson as they join the trade spat.

However, it isn't clear what they can do. Sure, mandarins in Beijing can think up tit-for-tat moves that would reduce American imports into China by the same amount as the perceived loss of Chinese exports of photovoltaic cells. Alternatively, President Xi Jinping, who warned against protectionism at the congregation of the global elite in Davos last year, can return to that theme in this week's Swiss Alps gabfest with an "I told you so" speech. Then he can go back and plot to keep Wall Street out of his planned relaxation of foreign-ownership caps for Chinese banks, securities and insurance firms.

The Chinese do have weapons they can fire, though as I've argued before, selling US Treasuries is not part of that arsenal.

The Koreans should be more anxious about Trump's intent, and what he might do next.

Such nervousness would be entirely legitimate, because it's hard to see how levies of up to 50 percent on large residential washing machines would Make America Great Again. Whirlpool Corp., which complained about unfair price competition, says it's going to add 200 jobs to its Clyde, Ohio factory after the tariff. However, as this Los Angeles Times story has chronicled, Samsung Electronics Co. and LG Corp., the targets of Whirlpool's displeasure, are also in the process of expanding or building their own washing-machine factories in the US.

Can they pull the plug on those plans?

Washers are a rounding error when it comes to Samsung's $212 billion in annual global sales. It's far more important for the beleaguered Korean chaebol, mired in a bribery scandal and accused of stifling competition at home, to earn brownie points for good corporate citizenship from President Moon Jae-in. So if Samsung and LG threaten to curtail or walk away from their South Carolina and Tennessee factories on Seoul's instructions, net job gains from Trump's tariff would be negative -- and washing machines in America more expensive.

Besides, should this first global safeguard action by the US in almost two decades become a template for more consequential categories, global trade would face renewed uncertainty just as it was regaining momentum. When Bush went tough on steel imports, the U.S. unemployment rate was 5.7 percent and rising; it's 4.1 percent now, and coming down.

The timing of these tariffs is all wrong, and the motivation dubious. Somebody better find the orange juice to calm Trump down.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.