Why is the Trump administration putting a tariff on Chinese LEDs?

Installing bulb
© Cree bulb

Could it be that more efficient lighting means less coal being dug to power it?

Perhaps the most important green revolution in the last decade has been the switch to LED lighting. They use a tenth of the power that incandescents did and last so long that they are changing lighting design and becoming part of the fabric of buildings. One of the leaders in the industry is Cree, which makes 5.5 BILLION LED chips each year in Durham, North Carolina. But it ships a lot of those to China, where they are assembled into fixtures, and then shipped back.

Now, the Trump administration is imposing a 25 percent duty on LEDs imported from China, even though they are made with American diodes. According to Jay Greene in the Wall Street Journal,

The fallout will lead to “reductions in our R&D spend, our expansion of manufacturing facilities, and, therefore, the development of new cutting-edge” American intellectual property.

When I complained about how Trump's tariffs may kill the e-bike revolution, most commenters said, “So what? That might bring manufacturing back to the USA. That’s the point.” But you cannot really say the same thing about a commodity like LEDs.

That duty cuts into a Cree business already challenged by low-cost rivals, said Joe Osha, an analyst with JMP Securities. In the quarter ended in March, Cree’s LED business generated $143.3 million in revenue with 26.4% gross margins, down from $150.2 million and 34.7% gross margins just two years earlier. “They’ve got troubles enough in this business,” Mr. Osha said.

We have covered Cree often in TreeHugger; they are constantly bringing out new and better products. Their bulbs have better colour balance and a smoother spectrum than cheap bulbs and are my dumb bulb of choice (vs smart bulbs like Philips Hue). It is already a tough market because there are lots of cheaper bulbs these days and things like CRI (colour rendering index) are a tough sell. A minimum 25 percent increase in price doesn’t make it any easier.

The point of tariffs is supposed to be to protect or promote local industry, so if the most important manufacturer in the US is against it, why is the government doing it? Perhaps for the same reason I believe electric bikes were targeted: anything that reduces energy consumption means less coal or other fossil fuels being burned.

LEDs reduce consumption a lot. Overall electricity consumption is down, even as the economy grows. Lucas Davis of the Energy Institute at HAAS writes that “between LEDs and CFLs there are now one billion energy-efficient lightbulbs installed in U.S. homes. If operated 3 hours per day, this implies savings of 50 million megawatt hours per year, or 0.16 megawatt hours per capita, about the size of the decrease.”

Everything this government does seems to be about promoting fossil fuel extraction and consumption, so we can’t have that. Time to make the picture for LEDs a little less bright.

The author, Lloyd Alter, has been a guest of CREE in Durham, NC.

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