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Trump announced up to 30 percent import tariffs on solar panels

Trump announced up to 30 percent import tariffs on solar panels
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Image source: Bloomberg

By Charles F Moreira, Editor

So US President Donald Trump approved up to 30 percent import tariffs on imported solar cells and panels, on 22 January 2018, the day our article Will Trump agree to import tariffs on solar panels? appeared.

These tariffs which are limited to a four-year period will start at 30 percent in the first year and gradually decline to 15percent in the fourth year. Also, the first 2.5 gigawatts of imported solar cells are exempt for each year.

Solar manufacturers in the US have reason to welcome these tariffs. For example, shares of Tempe, Arizona-based solar panel manufacturer First Solar, Inc. jumped 9 percent to US$75.20 in after-hours trading in New York, as it now faces less intense cost competition from imports.

First Solar is the largest amongst the few panel makers left in the US after most manufactures had migrated to China in the past decade. However, with 80 percent of solar energy installations in the US using imported panels, this move is expected to negatively impact the US$28 billion solar industry in the US, most of which are installers which rely on these imports.

A chart published by Bloomberg shows that Malaysia accounted for 34 percent of solar panel imports into the US between January to October 2017, followed by South Korea (22 percent), Vietnam (13 percent), Thailand (9 percent), China (9 percent) and other countries (12 percent). These figures are based upon data from the US International Trade Commission and Bloomberg New Energy Finance.

And, according to the US based Solar Foundation’s National Solar Jobs Census, the industry employed 250,271 workers in the US in 2017, down 4 percent from 260,077 workers in 2016 but up 168 percent from 93,502 workers in 2010.

Malaysia exempted

However, according to a Bernama.com of 7 February 2018, Malaysian manufacturers are not subject to this tariff, thanks to the Trade and Investment Facilitation Agreement (TIFA) between Malaysia and the United States.

“Malaysia is a major exporter of solar panels and its components with an export value of US$4 billion in 2017”,  Malaysia’s International Trade and Industry Minister Datuk Seri Mustapa Mohamed said.

“After discussion with the US under the TIFA umbrella, we were informed that Malaysian companies will not be adversely affected by the 30 per cent duty”, he told reporters at the announcement of Malaysian trade performance 2017 in Kuala Lumpur that day.

However, China, South Korea and Europe were upset by these tariffs.

According to a Reuters report on 23 January 2018, China and South Korea condemned steep import tariffs on washing machines and solar panels imposed by Trump, with Seoul planning to complain to the World Trade Organisation (WTO) over this move which it described as “excessive”.

At the same time, Europe said it regretted the US decision and would react “firmly and proportionately” if EU exports were hit by the tariffs, which Asia fears could be the start of greater protectionism and stall a revival in global trade.

Unhappiness in the US too

Besides Asia and the EU, there are objections from within the US too.

Earlier, in a press release on 22 January 2018, the Solar Energy Industries Association (SEIA) – the national trade association for the US solar industry – and its members expressed disappointment over these tariffs, saying that they will result in the loss of roughly 23,000 American jobs this year, including many in manufacturing, and they will result in the delay or cancellation of billions of dollars in solar investments.

“While tariffs in this case will not create adequate cell or module manufacturing to meet US demand, or keep foreign-owned Suniva and SolarWorld afloat, they 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,” said Abigail Ross Hopper, SEIA’s President and CEO.

Meanwhile, SEIA members expect their impact to be far-reaching across all sectors of the solar economy in the US

“It boggles my mind that this president – any president, really – would voluntarily choose to damage one of the fastest-growing segments of our economy,” said Tony Clifford, chief development officer, Standard Solar. “This decision is misguided and denies the reality that bankrupt foreign companies will be the beneficiaries of an American taxpayer bailout.”

SEIA estimates that tariffs at this level will eliminate, not add to, American manufacturing jobs. There were 38,000 jobs in solar manufacturing in the US at the end of 2016, and all but 2,000 made something other than cells and panels, the subject of this case. Those 36,000 Americans manufactured metal racking systems, high-tech invertors, machines that improved solar panel output by tracking the sun and other electrical products.

“There’s no doubt this decision will hurt US manufacturing, not help it,” said Bill Vietas, president of RBI Solar in Cincinnati. “The US solar manufacturing sector has been growing as our industry has surged over the past five years. Government tariffs will increase the cost of solar and depress demand, which will reduce the orders we’re getting and cost manufacturing workers their jobs.”

“This is a bad day for the US,” said Costa Nicolaou, president and CEO of PanelClaw, an American racking company. “What’s most disappointing is that the president sided with two foreign-owned companies and didn’t listen to Americans from across the country and political spectrum who understood tariffs will cause great economic pain for so many families in the solar sector.”

However, despite its belief that these tariffs will negatively impact its industry, the SEIA is relieved they are nowhere near as high as what US based solar equipment manufacturers Suniva and Solar World had requested. They also are lower than the 35 percent which the US International Trade Commission had recommended in October 2017.

Also, the SEIA looks forward to “working with interested parties to achieve a positive outcome in the existing anti-dumping and countervailing duty cases. “

“While we believe the decision will be significantly harmful to our industry and the economy, we appreciate that the president and the administration listened to our arguments,” Hopper said. “Our industry will emerge from this. The case for solar energy is just too strong to be held down for long, but the severe near-term impacts of these tariffs are unfortunate and avoidable.”

Meanwhile, others fear that these tariffs could have broader worldwide ramifications, including to attract retaliatory counter measures from other countries.

“We are inclined to view it as posing greater trade risk for all types of energy, particularly if other nations establish new trade barriers against US products,” Washington-based research firm ClearView Energy Partners LLC said Monday.

Not all gloom

However, others are confident that the US solar industry – both manufacturing and installation – will continue to grow despite these tariffs.

“This is not a goodbye for renewable energy in the US,” Fatih Birol, executive director of the International Energy Agency, said at the World Economic Forum in Davos, Switzerland. “I don’t believe this decision will reverse the solar expansion in the US The global solar industry will adjust. The penetration of solar in the US will continue.”

Neither has it been gloom for all American solar installers as despite higher anticipated costs, as shares of installers including Vivint Solar Inc. and Sunrun Inc. jumped in after-hours trading.

“A 30 percent tariff in Year One is bad,” said Gordon Johnson, a New York-based analyst at the Vertical Group, but “it’s less than what the consensus was.”

Jigar Shah of investor Generate Capital Inc. and a strong solar industry advocate, welcomed this as “good news” and “exactly what the solar industry asked for behind closed doors” to prevent a negative impact on companies.

Not that severe

Others believe that whilst these tariffs will no doubt make solar installations more expensive, however increases will not be all that much of a burden for the US solar industry.

Hugh Bromley, a New York-based analyst at Bloomberg New Energy Finance estimated that these tariffs will increase costs for large solar farms by less than 10 percent and by about 3 percent for residential systems.

On the other hand, Bromley does not expect these tariffs to result in as many solar energy equipment manufacturers to set up operations in the US as is hoped for.

These tariffs are amongst measures by Trump to fulfil his election promises to bring back manufacturing to the US Besides solar, other potential decisions on trade involve washing machines, consumer electronics and steel.

 

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