US Solar Tariffs: What Past Experience Tells Us About The Impact

On January 22, President Donald Trump imposed tariffs on solar panels in what he called an effort to “create jobs in America for Americans.” The move prompted widespread criticism from both solar and free trade advocates.

While the president argued that solar companies would “com[e] back strong” with the addition of “a lot of jobs,” the Solar Energy Industry Association, which represents the full spectrum of the US solar industry, immediately expressed their objections. They estimated that the 30-percent tariff on imported solar cells and panels would cause the loss of 23,000 jobs in 2018, as well as the delay or cancellation of billions of dollars of investments in solar energy. Past experience from earlier trade disputes in the solar energy subsector support this view.

Solar tariffs are actually not new for the United States. In 2012, the Department of Commerce’s International Trade Commission (ITC) issued a duty on solar cells from China. Later, in 2015, the ITC imposed another penalty on solar cells imported from Taiwan. The ITC claimed in both cases that an industry in the US was being materially injured by imports of solar cells and modules from these countries. American manufacturers were hurt by falling prices of solar products as a result of a flood of Chinese solar products. Since 2011, numerous manufacturers including Solyndra, Helios USA, and BP Solar closed their US production facilities.

Yet the tariffs imposed did not really save US solar cell and module manufacturing from international market pressures. At this point, there are only 14 solar cell/module manufacturers in the US. A majority of solar cell and modules are now produced in Asia, with China as the leading (and most cost competitive) producer worldwide. The impact of American tariffs was insignificant partially because Chinese manufacturers could simply move their production to other Asian countries to avoid the tariffs. The tariffs on Taiwanese cells attempted to close this loophole, but the manufacturers still had many other options (such as Vietnam).