Last Modified on April 19, 2023 by Alex Edmonds
Global markets have been reeling in the wake of U.S. President Donald Trump’s tariffs on steel and aluminum. The tariffs have caused serious rifts between the U.S. and its longtime allies like Canada and the European Union. Less reported on, but no less important, has been the impact of Trump’s prior tariffs on solar cells and panels.
Back in January, Trump announced tariffs of 30 percent on imported solar panels. The tariffs – which will decrease by five percent annually and expire after four years – were the product of a trade dispute brought by two solar panel manufacturers, Suniva and SolarWorld, who charged that foreign competition made it impossible for U.S. manufacturers to compete. (Both companies, ironically, are foreign-owned.) Trump imposed the tariffs despite widespread opposition from the solar industry, which has broadly benefited from the availability of cheap, imported solar panels. Trump’s solar tariffs also extend to solar cells, but the import cap only begins after 2.5 gigawatts are imported. In 2017, only 500 megawatts of solar cells were imported to the U.S., so it’s unlikely that solar cell imports will be affected by the tariffs.
But the global effects of Trump’s solar tariffs are already being felt. One of the big effects is an influx of foreign solar panel manufacturing to the U.S. from panel makers who are eager to sidestep the new import duties. Jinko Solar, for instance, a major Chinese panel maker, has announced it’s opening a new facility in Florida. The factory will be capable of producing about one million solar panels each year. SunPower has announced it plans to move more of its operations to the U.S. from Malaysia. And in January, Suvi Sharma, the chief executive of Solaria, a solar panel maker based in California that makes panels in both the U.S. and South Korea, said the trade action would likely spur the company to shift more of its production to the U.S. But Sharma also worried that the tariffs could hurt the industry’s prospects by increasing the cost of solar energy in the U.S., where it has only recently become competetive with traditional (coal and natural gas) energy production.
Sharma was not alone in his suspicions. Shortly after the tariffs were approved, Abigail Ross Hopper, president of the Solar Energy Industries Association, said Trump’s decision “will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs.” In a May interview, she said her worst fears had been realized. The tariffs, she said, “have slowed down the growth of our industry. The growth has been muted, and that means jobs are not being created.” The SEIA estimates that the tariffs could cost as many as 23,000 American jobs this year alone. Overall, solar installations in the U.S. are expected to be 11 percent lower through 2022 than they would have been absent the tariffs.
Outside the U.S., Trump’s solar tariffs have the same effect that his tariffs on aluminum and steel have – namely, they exacerbate tensions between the U.S. and its longtime allies and trading partners. South Korea and China, for instance, have said they intend to take their complaints about the tariffs to the World Trade Organization. And both Japan and Korea have also said they’re considering retaliatory tariffs on American goods. Mexico, meanwhile, has threatened legal action against the U.S. over the tariffs, and Canadian companies have sued to obtain exemptions.
The tariffs also have important environmental impacts, since they make it more expensive for companies, cities, and homeowners to go solar. As solar begins to look less attractive, it’s possible that power plants and communities will seek to adopt other renewable options like wind power, but they’re also like to increase or extend consumption of fossil fuels. And America’s sluggish transition from fossil fuels to renewables is a problem with global consequences, since the U.S. is the world’s second-largest emitter of greenhouse gases and a major driver of climate change.
Another significant way in which the tariffs will negatively affect the international solar industry is that they depress investment in research and development. America’s advantage in the solar industry isn’t its ability to manufacture panels quickly or cheaply. Rather, it’s that the U.S. makes panels that are better than those of its competitors. But as Varun Sivaram wrote in an article for the Council on Foreign Relations earlier this year, the tariffs “will do little to protect firms developing emerging solar technologies that need some insulation from the global solar commodity market to scale up their innovations. On top of this, the tariffs might curtail even the limited research and development (R&D) investments made today by U.S. innovators.” And since the tariffs last four years, that means investors interested in solar will also likely wait at least that long before funding promising new solar technologies, at least in the U.S.
Despite the tariffs, the U.S. solar industry is expected to continue growing over the next four years, though at a rate that’s far slower than what would be otherwise expected.