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Are New Tariffs On China Tied to November Elections?

While it is portrayed as completely non political, tariffs on China could help Obama.
By Amiel Ungar
First Publish: 5/20/2012, 9:03 AM

Solar panel factory China
Solar panel factory China
Reuters

The decision by the Commerce Department to slap tariffs on the import of Chinese solar panels can be explained as a simple bureaucratic decision and a reaction against Chinese dumping.

Americans are told that the Commerce Department is staffed by civil servants and is insulated from political interference. As a totally different political culture operates in China, the Chinese find it difficult to distinguish politics from administration and therefore they see the heavy hand of politics in the decision.

They are probably not alone, and since this is an election year and some of us have suspicious minds, other explanations suggest themselves.

Mitt Romney has on numerous occasions argued that the administration has been too lenient with the Chinese in terms of currency and trade manipulations - and this decision provides the Obama administration with an excellent rebuttal.

The Obama campaign also anticipates that the Republicans will replay Obama's promise of combating unemployment in the United States with millions of green jobs. The green jobs have not materialized. 

The administration will have to answer for the Solyndra scandal where the administration invested megabucks in loan guarantees on a green company that failed. Here, as well, accusing China of unfair trade practices, allows the administration to argue that the plan was essentially sound, but was thwarted by the Chinese.

As with other cases where the US tries to impose tariffs to protect American industries against unfair practices, the business community is divided.

American solar panel manufacturers are obviously delighted and view the decision as a "very positive step".

Advocates of punitive tariffs claim that a policy of direct and indirect subsidies to Chinese manufacturers represents an attempt to knock out global competitors, particularly in fledgling industries where such tactics can quickly succeed.

US importers of solar panels claim that the US will emerge the loser, because China will issue retaliatory tariffs making it more difficult for American companies to sell their products in China. The importers are also invoking the ecology arguments. By favoring American companies instead of the American consumer, the tariffs will make solar panels less affordable and as a result fewer people will install them. This means that hundreds of megawatts of renewable energy will have to be replaced by conventional polluting fuels.

The Chinese claim that the US tariffs are unfair and a source of extreme dissatisfaction to China. China also imports raw materials from the United States to manufacture the solar panels and therefore the United States is shooting itself in the foot.