Two Solar Companies Begged For Tariffs & Swore It Would Save Their Companies
- Thread starter Ponca Dan
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My god you people are just the worst. Hilariously bad. Could you be more easily distracted? Probably.
Ponca, can you explain something to me that I'm not following. Why are Whirlpool's costs higher and revenue lower due to tariffs as stated in the story? Tariffs are taxes charged on imported goods. Whirlpool washers aren't imported. They wouldn't have had any tariffs on them. The only market change should have been Samsung and LGs washers become more expensive which makes Whirlpool models more attractive in the marketplace (which should increase revenue). Is the issue counter tariffs by foreign markets? If so, none of the stories say that. Is it alternate tariffs on other goods increasing their costs (such as imported steel)? Again, not what's implied in the story. This is the quote: "Whirlpool saw its share prices tumble 15 percent over the next six months while the company's revenue fell well short of expectations as consumers were soaked with higher prices". Yet Washing machine tariffs would not have raised prices 1 red cent on Whirlpool washers and people buying competing washers which are now more expensive weren't buying Whirlpools anyway. What am I missing here?
Same story with the Solar panels. The tariffs didn't cause them to lose any money. I'll accept that the increased prices reduced demand in the market and that would have negative consequences to the installer companies, but again that's not what this story is talking about (although it does state this "they will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs"). I do think the blue-collar jobs are installers. I'll even accept that the Solar panel industry is such that the cost to manufacture in the U.S. is simply too high to sustain enough demand although that's kind of not what the story says: "While tariffs in this case will not create adequate cell or module manufacturing to meet U.S. demand..." That seems to imply that increasing the pricing won't drive new manufacturing growth in the U.S. (increased supply and more jobs), but again, that wouldn't cause the companies to go under.
Same story with the Solar panels. The tariffs didn't cause them to lose any money. I'll accept that the increased prices reduced demand in the market and that would have negative consequences to the installer companies, but again that's not what this story is talking about (although it does state this "they will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs"). I do think the blue-collar jobs are installers. I'll even accept that the Solar panel industry is such that the cost to manufacture in the U.S. is simply too high to sustain enough demand although that's kind of not what the story says: "While tariffs in this case will not create adequate cell or module manufacturing to meet U.S. demand..." That seems to imply that increasing the pricing won't drive new manufacturing growth in the U.S. (increased supply and more jobs), but again, that wouldn't cause the companies to go under.
Those are very good questions. Unfortunately I don’t know the answers. Off the top of my head I would guess the American manufacturers followed the lead of the American steel industry and, being the greedy bastards they are, raised their prices once the foreign competition was forced to raise theirs. The higher the price the lower the demand. The lower the demand the lower the bottom line. The lower the demand the lower the need for blue collar workers to make the product. In Whirlpool’s case (and maybe in the solar industry, too) the needlessly jacked up price in steel raised the cost of manufacturing the product in the first place.
Every consumer has his own unique price point for a product. Once the price nears or exceeds that point it puts that consumer out of the market. For many individuals Whirlpool’s price was higher than they could afford, so they opted for the foreign product. Whirlpool in conjunction with their crony capitalist president managed to force the foreign competition to raise its price. That didn’t change the fact that Whirlpool was too expensive for those consumers. It just made the foreign product too expensive as well. The tariffs simply reduced the number of people looking to buy washers and dryers. If Whirlpool was already having problems and they thought forcing the competition to raise its price would help it misunderstood what was causing their situation. The tariffs would not help them, in fact in the long run it hurt not only them but the entire industry.
My wife has presented me with a “honey do” list about a mile long. Sorry I won’t be able to visit today. If you want to continue I’ll try and catch up with you this evening.
I agree with you. But if they chose to raise their prices under the guise of tariffs, then it wasn't the tariffs that are hurting Americans or preventing them from working as expected. It just makes for a convenient excuse for shitty business when people don't like the man in charge.
Edit: Sorry should have read your post more closely: Its worth noting that Washing machines sales are not down even with the tariffs, so the fact the prices were higher didn't reduce overall sales. If Whirlpool can't run its business its not because the tariffs did anything to them, contrary to what the article postulates.
I missed the part in the article that says washing machine sales are up. There is a link in the article whose headline says the opposite.
https://reason.com/2018/07/17/whirlpool-thought-tariffs-would-protect/
Like I said before we all have our own price point. Let’s suppose Joe the vacuum cleaner salesman is in the market for a washing machine and his reality dictates the highest price he can afford is X. Unfortunately for Joe Whirlpools price is X+.15. Joe can’t afford Whirlpool but he can afford an LG that costs X. Whirlpool persuades the government to impose tariffs that now push LG’s price to X+.15. Now Joe is out of the market completely. Joe is an innocent bystander who is hurt by the tariff. He can’t afford any washing machine now. So he doesn’t buy one, causing a negative backlash against the industry as a whole. Consider there are hundreds if not thousands of Joes that are affected.
Then there’s Fred the shoe salesman who’s also in the washing machine market, and his price point is X+.15. He could afford either LG or Whirlpool. But Whirlpool gets its tariffs, fails to recognize the damage it is causing, decides to increase their price to X+.165. Fred has just been dropped out of Whirlpool’s potential customer base. He either buys the LG at X+.15 or doesn’t buy one at all.
And on top of the increase on washing machine prices Whirlpool decides to raise the price on its dryers as well, reasoning that most people buy by the set, so they’ll probably pony up the extra money. And they’re right, most people will pony up the money. But not everybody can or will. Suppose the price increases drop 5% of potential buyers out of the market. That’s a negative impact on the industry.
Lastly let’s consider Susan the florist. Susan’s circumstances are such that she can still buy the Whirlpool, both the washer and dryer at X+.165. Susan’s situation is she had intended to buy the Whirlpool at X+.15 AND a new vacuum cleaner from Joe AND a new pair of shoes from Fred. Now all she can afford is the washer/dryer. A perfect example of Bastiat’s Law Of Unintended Consequences.
And the consequences rattle all across the economy. Joe and Fred didn’t get to make their sales, so they can’t purchase more inventory from their suppliers, and lagging sales for the suppliers mean a worse bottom line for them. Employees are let go one or two at a time spread over dozens of companies. Those unemployed people cease to be part of Whirlpool’s customer base.
Like I said in the beginning, I haven’t the foggiest notion of how Whirlpool runs its business. It is interesting though to consider that tariffs intended to help Whirlpool failed to do so. Tariffs intended to save the solar companies had the opposite effect. Tariffs designed to bolster US steel manufacturers have backfired. What’s the common denominator in all those instances? Wouldn’t you agree it’s tariffs? Economists have explained the harm of tariffs for decades, but they have such an emotional political appeal to politicians and their followers they are almost impossible to stop. Eventually even politicians recognize the damage they are causing. Both Bush 2 and Obama tried them and dropped them rather quickly. Who knows what Trump will do?
My issue is very simple. The statement says that All washing machines went up in price because of the tariff. That is NOT true. Whirlpool's price did NOT got up because of the tariff. Now they may have used the tariff as an excuse. But the tariff did not raise their price. If it did then it wasn't a tariff (a tax on imported goods), it was a sales tax (a tax on any goods sold).
Actually it wasn’t a tax of any kind. It was a raise in price decided on by Whirlpool. The decision was made because the tariff had been imposed on the imported machines, and Whirlpool calculated it could raise its prices without consequence. So technically I suppose you are correct. However the increase in price came about because of the tariff. There would have been no price increase if there had been no tariff. But I admit, technically the price increase was not because a tariff had been imposed on Whirlpool (if I understand correctly what you are saying).
The steel industry did the same thing, immediately raised prices thinking they had managed to chase out the competition and buyers would have no options but to buy from them.
All three industries (steel, solar and Whirlpool) followed the standard procedure. Wanted to drive out the competition, pled with the president to “provide relief,” promising it would save their companies (indeed their entire industries), allowing them to hire more people. In all three cases the result was far different. The tariffs were used as a sledge hammer by the companies in hopes they could capture the market without having to compete.
The president for his part calculated he could claim he was saving manufacturing, saving jobs, when what he was doing was insuring he would get the union vote in the rust belt come re-election time. He used the standard argument politicians always use when imposing tariffs: America is getting screwed, manufacturing is lagging, jobs are being lost, and he, the politician, the president, is riding in on his white horse to save the country from ruin. It compares somewhat with blacks voting 90% for Democrats. Uninformed voters fall for the tariff argument every time. If you think about it it is an interesting phenomenon.
