International trade relations are guided by mutual trade agreement between two or more countries. One of these rules is tariffs. A tariff is a duty or a tax policy imposed by the domestic government to regulate the amount of goods and services that flows in and out of the country (David & Stewart, 2010). This paper intends to discuss the trade relations between the United States and China and the effects of imposing tariffs on both parties.
Commercial trade relations between the U.S. and China have been taking place since 1981. China is the United States’ second largest trading partner and the biggest source of imports. China offers around $200 billion for U.S. firmsof late(Todd, 2012). The group of U.S. Solar manufacturers has accused Chinese Solar Cell manufacturers of illegally dumping their photovoltaic cells at a cheaper price on the American market (Todd, 2012). This has led the U.S. Department of Commerce to effectively implement the anti-dumping tariffs on imports from Chinese solar manufacturing companies (Todd, 2012).
The implementation of anti-dumping tariffs aims at cushioning domestic solar industries against stiff competition from foreign solar manufacturers. The low prices offered by Suntech, biggest Chinese solar producing company, would not match the high cost of solar production for the U.S. firms. Therefore, to support its companies’ existence, the U.S. should regulate the solar prices in the market by imposing an anti-dumping tariff on imported photovoltaic cells from China (Todd, 2012).
Implementation of the anti-dumping tariff would also secure jobs for U.S. citizens. Unfair competition against Chinese products would have a potential of killing the domestic industry that provides a significant percentage of employment opportunities for Americans (David & Stewart 2010). Therefore, placing exports tariff would mean protecting jobs for the U.S. citizens. Thus, the market should be protected to promote the growth of the local industry.
The anti-dumping policy will generate revenue for the U.S. government (David & Stewart 2010). The introduction of the tariff rules has implications for the Chinese solar products as well. Therefore, Chinese solar manufacturing companies have to adhere to the introduced tariffs to continue trading in the U.S. market. The intention of the tariff rule is not to halt the existing bilateral trade relations between the two countries, but rather to disapprove of China dumping its products on the cherished U.S. market.
Introduction of anti-dumping tariffs has negatively affected the consumers. Most consumers in the U.S markets preferred the cheap photovoltaic cells solar machines from China. The variety that they could choose from is now slim. Local photovoltaic cells’ consumers have to shop the locally produced goods from now on (David & Stewart, 2010). Most solar-related companies will also be negatively affected by the anti-dumping tariff. These companies import their raw solar products from China. Companies like solar installers will now have to cater with extra costs associated with the import tariff.
The implementation of the tariffs is likely to lower competition among the domestic solar firms. This, in turn, will lead to lower standards of production of photovoltaic cells and other solar products (Todd, 2012). The impacts of anti-dumping tariffs are not only felt in the U.S., but also in China. The Chinese solar industry will lack markets to sell their excess products. As a result, solar companies would generate very low profits. Chinese Suntech is already paying dearly because of the new changes in trade tariffs. The company, like many others that supplied their products to the U.S., is now facing huge debts (Todd, 2012).
In conclusion, the anti-dumping tariffs have both pros and cons. Thus, they should be optimally used to promote bilateral and multilateral trade. The global competition should be encouraged between solar companies, because this would encourage further research in the energy sector in general and solar energy in particular.