CFC Solutions: U.S. Slaps 30 Percent Tariff on Imported Solar Panels, Effects Unclear

This article from the 29 January 2018 issue of CFC Solutions News Bulletin is reprinted with permission.

President Trump on Jan. 22 moved to impose tariffs on solar panel imports, with the levy starting at 30 percent then dropping to 25 percent in year two, 20 percent in year three and 15 percent by 2022. (According to GTM Research, a 30 percent tariff pencils out to roughly 10 cents to 15 cents per watt and would reduce utility-scale solar installations by 9 percent.) Solar cells would follow the same phasedown but would be exempt entirely from tariffs for the first 2.5 gigawatts of imports. The penalties chosen were one of three recommended last year by the U.S. International Trade Commission.

The case began when solar manufacturers Suniva and SolarWorld Americas filed a petition last year under the rarely used Section 201 of the Trade Act of 1974 alleging that rampant imports, primarily from Asia, had taken market share from domestic producers and led to bankruptcies, plant shutdowns, layoffs and a severe deterioration of financial performance. Suniva and SolarWorld are the two largest U.S. makers of crystalline silicon photovoltaic components. Combined, they produced 1.5 gigawatts of solar modules and cells in 2016, accounting for 65 percent of U.S. output.

The proceeding is seen as a first test of President Trump’s tough-on-trade, “America First” agenda and could serve as a prototype for future protectionist efforts, notably on steel, aluminum and timber. Anticipating the decision, solar developers have been hoarding panels since May, swelling prices by about 40 percent and slowing the $29 billion U.S. solar industry.

According to Krishna Murthy, CFC vice president of energy and industry analysis, net effects of the action will not be significant—averaging under 10 percent if the full tariff is passed on immediately. “More likely the impacts will be slow to materialize and eventually negated by evolving industry and trade dynamics. The tariffs will probably be challenged before the World Trade Organization, which could delay implementation, and reactions and adjustments in the supply chain should shift some overseas solar manufacturing to the United States. In addition, a decent part of projected price hikes from the tariffs will be absorbed by the relentless downward sloping cost-curve for solar panels—a reduction of 10 percent to 20 percent from current levels is believed achievable in the near term.”