Changing Trade Rules Can Help the U.S. Economy, but Tariffs on Advanced Energy Products Would Hurt

Posted by Dylan Reed on May 11, 2018 11:38:12 AM


Chinese container ship unloading at Charleston, S.C. Photo by Mr.TinDC used under a Creative Commons license

From his first campaign speech to the first 15 months of his Administration, President Trump has made changing the terms of U.S trade deals a central priority, and in 2018 he has proposed a variety of tariffs. In particular, tariffs on Chinese imports have been one of the major trade policies put forward by the Administration. Most analysts have focused on the tariff impacts on particular products, such as steel and aluminum, or how potential retaliatory tariffs from China could impact American interests, such as agriculture.

Unfortunately, advanced energy will be impacted too. In comments to the U.S. Trade Representative, we outline the impacts of proposed tariffs on advanced energy products such as smart thermostats, electric vehicles, and wind turbine components. AEE believes the Administration is taking important steps to combat unfair trade practices by China, but we are also concerned that imposing tariffs on certain products will hurt the advanced energy industry and consumers, without achieving the administration’s goals.

As the business voice of advanced energy, AEE advocates for policies that create a more secure, clean, and affordable grid for all Americans. We believe that strong trade policy can and should support the broad growth of American energy resources. And for good reason. Currently, advanced energy represents a $200 billion U.S. industry that supports more than 3 million workers. Advanced energy supports innovation in the domestic energy resource mix and lower costs for American businesses and households, as well as a more reliable and affordable electric grid for all Americans.

We also agree that there are substantial problems resulting from China’s ongoing violation on intellectual property (IP) rights, and support efforts to stop anti-competitive practices that harm American businesses and our economic competitiveness.

AEE is very concerned, however, that the proposed tariff list – and proposals to increase and broaden tariffs – will ultimately not advance the goal of changing these harmful practices. Rather, the proposed tariffs will work against the administration’s goal of energy dominance by increasing the cost of energy for American households and businesses, decreasing domestic manufacturing of energy-efficient products, including electric vehicles, and discouraging American energy innovation.

Specifically, tariffs that impact smart thermostats and products essential to EVs will:

  • Harm Consumers:  The proposed tariffs will punish the U.S. consumer by driving up the price of a consumer product that is becoming increasingly popular because of the energy cost savings it delivers. By 2020, 40 million U.S. households are projected to have a smart thermostat. Tariffs will also put upward pressure on energy bills as consumers are less able to afford energy-efficient smart thermostats. Studies have shown consumers can save up to 12% on heating costs and 15% on cooling costs thanks to smart thermostats.
  • Discourage U.S. Innovation: The design and technology in smart thermostats is developed in the United States by highly skilled workers.  Americans have been and continue to lead in developing thermostat technology. IP protection is critical for fostering innovation, but so too is maintaining markets for the products of innovation. Imposing tariffs on the products of U.S. innovation simply because they, or their components, are manufactured abroad undercuts America’s most enduring competitive advantage.
  • Harm Local Governments: Increasingly, municipalities are purchasing electric buses for their public transportation fleets. Local governments see the benefit of electric buses in long-term savings on fuel and operations and maintenance costs. However, one of the barriers to purchasing electric buses is the upfront capital. Even a slight increase in costs from these proposed tariffs could preclude local governments from moving forward with purchases of electric buses. 

The Office of the U.S. Trade Representative will hold a three-day hearing for stakeholders to testify on the impacts of the proposed tariffs, May 15-17, 2018. AEE will testify on Day 2 to highlight the impacts of the tariffs on advanced energy. Negotiations to improve the terms of international trade can grow the U.S. economy, but the Administration should avoid broadly applying tariffs that will hurt American interests.

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Topics: Federal Policy Update, Advanced Transportation