As Hayek warned in today’s Q.O.D., attempts by government to protect group A from competition cause harm to group B – and, in this case, in a way that also runs counter to the Obama administration’s mercantilist obsession with increasing American exports. (HT Kevin Kennedy)
Note that in this instance the unintended ill consequences of Uncle Sam’s restrictions on Americans’ purchases of Chinese-made solar panels would have occurred even if the Chinese government did not retaliate by slapping high retaliatory tariffs on U.S.-supplied polysilicon. Such retaliation (unfortunate for the Chinese people, yet perfectly predictable as a matter of trade ‘policy’) does indeed make matters worse for American producers of polysilicon. But because polysilicon is an important input used to make solar panels, Uncle Sam’s protectionist policy results in higher prices for solar panels and, hence, a reduction in the quantity of solar panels demanded. Fewer solar panels are produced – meaning, almost surely, lower demand for American-made polysilicon, and definitely a reduction in American exports of polysilicon.