Ecocentric

Solar: U.S. Slaps Tariffs on Chinese Solar Panels, But the Trade War May Be on Hold

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The solar industry in the U.S. has been holding its breath over a much-delayed review by the Commerce Department over allegedly unfair trade practices by Chinese solar panel makers. A few solar manufacturers—notably SolarWorld, an American arm of a German manufacturers—complain that the Chinese government is deeply subsidizing national solar panel makers, enabling them to undercut other manufacturers. Most of the solar industry—especially solar installers and financiers who benefit directly panel pricers—disagree, and argue that putting up trade barriers to Chinese imports would hurt the solar industry as a whole, costing jobs and momentum at a time when solar power is growing rapidly around the world. The Commerce Department had been scheduled to rule on the case at the beginning of the year, than in February and then on March 2. (For background on the case, check out my posts here and here.) Finally yesterday afternoon the results finally came in.

And they are… mixed. Commerce concluded that the Chinese government had provided illegal export subsidies and decided to slap on tariffs on solar panels imported from China. But those tariffs are relatively small—between 2.9% and 4.73%—and are unlikely to have much of an impact on sales, given the much larger cost advantages major Chinese solar makers already possess. So SolarWorld and its allies can claim that the U.S. government really has found that China is playing unfair on solar, while the larger solar industry is unlikely to be hurt much by the tariffs. As first shots in a much-hyped trade war goes, this one hasn’t done much damage.

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The reactions from the main players said as much. Here’s a representative from the Coalition for American Solar Manufacturing (CASM), the pro-tariff trade group that included SolarWorld:

Today’s announcement affirms what U.S. manufacturers have long known: Chinese manufacturers have received unfair and WTO-illegal subsidies. We appreciate the Commerce Department’s hard work in bringing these subsidies to light, and we look forward to addressing all of China’s unfair trade practices in the solar industry.

And here’s Jigar Shah, the president of the Coalition for Affordable Solar Energy (CASE), which was against the tariffs:

Today’s preliminary determination by the Department of Commerce imposing low tariffs on imported crystalline solar cells/modules from China, will, by itself, have a limited negative impact on the U.S. solar industry and its 100,000 employees. It also demonstrates that the Commerce Department did not find the Chinese government engaged in massive subsidization, as SolarWorld and CASM claim.

The fact that shares of Chinese solar companies like Suntech in New York surged after the Commerce announcements indicates that yesterday’s decision isn’t likely to change business as normal—at least for now, as Aaron Chew, an analyst at Maxim Group, told Bloomberg:

This could have been a lot worse. The tariffs were totally expected, but this is at levels that are much lower than expected.

Still, it’s notable anytime the federal government takes action against one of the U.S.’s biggest trading partners, especially in an election year where the anti-China rhetoric is likely to get heated. And the Commerce Department still has to rule on another allegation that Chinese companies are selling products at a loss in order to drive out international competitors. That’s a more serious charge—one Commerce is set to rule on by May 17—and it could carry much more serious penalties. Nor is this the only trade case that could pit the U.S. against China. The U.S.—and other countries—have complained about China restricting exports of valuable rare earth minerals, which are key to both clean and high-tech. That could well blow up in the coming months.

(MORE: U.S. Solar Manufacturers Decry Unfair Chinese Competition)

Most of the solar industry is hoping that trade barriers stay low, allowing the panels to be moved easily around the world—and pushing price down. “Putting up restrictions on trade isn’t going to help us,” Shawn Qu, CEO of the major manufacturer Canadian Solar, told me on Monday. And it probably wouldn’t help the climate either.

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