January 23, 2018 / 5:11 AM / 8 months ago

Breakingviews - Trump’s solar tariffs add new wrong to old

WASHINGTON (Reuters Breakingviews) - President Donald Trump is slapping tariffs on solar panels and cells imported into the United States. The levies should ease pressure on surviving panel makers, but pricier imports will set back most of the sector. It’s an illustration of how difficult righting past trade unfairness can be.

Solar installers from Baker Electric place solar panels on the roof of a residential home in Scripps Ranch, San Diego, California, U.S. October 14, 2016. Picture taken October 14, 2016. REUTERS/Mike Blake

The U.S. Trade Representative said on Monday that the administration would impose 30 percent tariffs on imported solar modules and cells. It also announced duties of up to 50 percent on imported large washing machines. Both investigations were undertaken as part of Section 201 of the Trade Act of 1974. The administration’s decision to employ that rarely used part of U.S. trade law may portend tougher trade policies to come.

Tariffs may ease pressure on long-suffering U.S. manufacturers. A 2012 Department of Commerce investigation found that the Chinese government provided unfair subsidies to solar cell exporters of around 15 percent, behavior that spurred Washington to impose duties that year. But critics say Chinese firms merely shifted production to other countries to evade the tariffs. According to the manufacturer’s petition, the market share of U.S. solar cell makers declined from 21 percent in 2012 to 11 percent in 2016, leading to 1,200 U.S. job losses.

The broader U.S. solar industry has fiercely resisted the new tariffs. Manufacturing is a relatively small slice of the sector. It accounted for only about 15 percent of the industry’s 260,000 jobs in 2016, according to The Solar Foundation. By contrast, installation made up 53 percent of the total. Sales and distribution, along with project development, accounted for another 25 percent.

Duties will dent those segments of the industry, which have benefitted from the falling cost of imported panels. A 50 percent tariff, for instance, would increase the cost of basic solar projects by up to 6 percent and utility-scale solar projects by up to 17 percent, according to ClearView Energy Partners, a research firm. Although the tariffs were smaller than manufacturers had sought, some reckon they might knock back recent price declines by several years.

That means the new levies may well leave the $23 billion industry worse off. The U.S. contains both producers and consumers, which means that righting past unfairness is inherently tricky. As with other trade issues, it’s hard to get the balance – and easy to add a new wrong to an old one.

Breakingviews

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