What Washing Machines Can Teach Us About Tariffs

Tuesday’s presidential debate featured tariffs as a topic, but they were explained poorly. Here’s a deep dive into a real-life Trump tariff to understand what his plan might mean: the 2018 washing machine tariffs.

Let’s say you’re a major retailer like Walmart. You might buy most of the washing machines that you sell at your stores from Samsung Electronics, which is based in South Korea, because of their cost and product popularity. In 2018, Trump instituted a tariff on imported washing machines starting at 20% for the first 1.2 million machines and then 50% for additional imports. This means that the majority of your washing machines just became 1.2x as expensive for you to purchase.

Where does that extra cost go? Well, like any other operating cost, it is passed down to the consumer. A study from University of Chicago in 2019 estimated that prices of washing machines increased 12% as a result of the tariffs. Dryers, a complementary good, rose in price as well. This price rise had a total consumer cost of $1.5 billion per year. [1]

However, it’s not all bad news. The expense of imports caused both Samsung and LG Electronics to each build a factory in the United States in previously blighted areas, investing hundreds of millions of dollars and creating over 2000 new jobs in the process. The price shocks faded as well, and by 2020, the cost of washing machines had returned to its previous levels. The tariffs expired in 2023 and were not renewed by President Biden. [2]

The UChicago study also had some flaws. It only analyzed the four month period with the highest prices and generalized it into a per-annum statistic, meaning that the true cost was very likely to be lower than the number they gave. [2]

One of the proposed benefits of tariffs is that they strengthen incumbent domestic industries, in this case Whirlpool Corporation. But a comprehensive report by the US International Trade Commission found that these manufacturers continued to decline in sales, wages, and capacity, with the gains in domestic manufacturing being entirely concentrated in the new Samsung and LG factories. It seems that the tariffs benefited some American workers, but they didn’t help American businesses at all. [3]

What’s the overall takeaway from the washing machine tariffs? If you take UChicago’s numbers at face value, each new job represented around $800,000 in consumer costs. Although the numbers are inflated for the period they analyzed, there was continued increased cost after the study was published as well, which likely balances out the number as a representation for the total cost, but not a per annum one.

What do you think? Were the tariffs worth it?

1 · 2 · 3

The linked analysis: What washing machines can teach us about the cost of tariffs.