Should President Trump Tax Washing Machines?

The Trump administration is being lobbied hard by Whirlpool, which produces washing machines in Ohio, to retreat from its strategy of cutting taxes and regulations.

Specifically, Whirlpool wants the administration to impose a combination of new taxes and regulations on imported washing machines and parts. In addition to Whirlpool, another potential beneficiary of this policy would be China-based Haier, which manufactures appliances in Kentucky.  

These new taxes would deter the efforts of competitors like LG and Samsung to expand in the United States, and could even jeopardize new appliance factories those companies are launching in Tennessee and South Carolina -- states that just happened to be big Trump backers in 2016.

The U.S. International Trade Commission (ITC) recently proposed a 50 percent tax on imported washing machines above the first 1.2 million units imported, along with an exemption for imports from several countries, including Korea.

The ITC’s decision was guided by U.S. trade laws that forbid the agency from putting the interests of the United States as a whole first in its decisions. Instead, the ITC could only consider the impact of imports on the U.S. industry requesting government aid. That’s bad news for workers in Tennessee and South Carolina who stand to benefit from new LG and Samsung factories, and also bad news for struggling brick and mortar retailers nationwide. Compared to t-shirts or blenders, large appliances are much more likely to be bought in person than through e-commerce sources like Amazon.

Kim McMillan, the mayor of Clarksville, TN expressed her frustration with the proposed new taxes: “This is all about washing machines that will be made in the U.S. It’s just a matter of whether they will be made in Tennessee, Ohio or South Carolina.”

As Reuters reported. “LG is spending $250 million to build a 600-worker factory in Tennessee, while Samsung is investing $380 million to renovate an old Caterpillar Inc. factory in South Carolina that will employ 950. Both states are dominated by Republicans.”

New washing machine taxes would also kick struggling U.S. retailers while they are down. That’s especially true for Sears, whose Kenmore brand of front-loading washing machines are made by LG. A Sears executive testified: “The draconian tariffs proposed in this case are a real threat to the iconic Kenmore brand. They also threaten our employees and local communities throughout the country.”

As President Reagan observed, protectionist policies pit one worker's job against another and sets American business and industry against each other, fighting for a piece of a shrinking pie. New taxes on washing machines could open the floodgates to anticompetitive behavior from U.S. companies seeking to achieve outcomes through the regulatory and political process that they were unable to achieve in the marketplace.

The ITC may not have been able to account for the interests of the hundreds of thousands of Americans working at Sears, JC Penney, and Best Buy, or the beneficiaries of LG and Samsung’s new investments in Tennessee and South Carolina, but President Trump sure can. In considering Whirlpool’s request for him to deviate from his tax- and regulation- cutting agenda, President Trump should put the interests of all Americans first.