Solar Tariff Case Throws Shade on Growing Solar Industry: Part III

Last week, just before signing the legislation to end the government shutdown, the Trump Administration announced that the President had approved 30% tariffs on imported crystalline silicone photovoltaic (CSPV) modules and cells. As discussed in an earlier post, the United States International Trade Commission (ITC) had proposed a range of remedies in response to a trade dispute brought two by U.S. solar cell manufacturers. All the ITC’s proposed remedies were below the statutory maximum of 50% sought by Suniva and SolarWorld.

Department of Energy

The President’s imposed tariffs align most closely with the recommendations of ITC Commissioners David S. Johanson and Irving A. Williamson. The President adopted the Commissioners’ recommended 30% ad valorem tariffs on imported CSPV cells and modules that decreases by five percentage points per year. However, there are two aspects of the President’s tariffs that diverge from those recommendations that are worth highlighting.

First, the President doubled the quota of imported CSPV cells exempted from the tariffs. Commissioners Johanson and Williamson had recommended that an average of 1.3 gigawatts (GW) of CSPV cells be exempted from the tariffs each year. The President’s tariffs exempt 2.5 GW of imported CSPV cells each year. The increased quota should lessen the blow to the U.S. solar industry—slightly. This is an area where ITC Commissioner Meredith M. Broadbent departed from her colleagues. Commissioner Broadbent was the only ITC commissioner to propose a tariff-exempt quota for imported CSPV modules in addition to cells. By exempting only CSPV cells, the tariff appears to encourage some amount of module assembly in the United States.

Second, the President’s tariffs apply to the broadest number of countries possible. While all four members of the ITC recommended that tariffs be imposed on CSPV cells and modules imported from South Korea and Mexico, a majority of the commissioners recommended that Canada not be included in the tariffs. Nevertheless, the President did not exclude Canada from the tariffs. In addition to Canada, the President’s tariffs also apply to CSPV cells and modules imported from Thailand and the Philippines.

While the President’s tariffs will likely cause numerous job losses—the Solar Energy Industries Association predicts that 23,000 solar-related jobs will be lost in the United States as a result of decreased demand for CSPV installations due to the expected increase in CSPV prices occasioned by the tariffs—the outcome could have been much worse. For example, the President’s tariff on residential washing machines, announced at the same time as the CSPV tariff, exceeded the harshest recommendations made by the ITC.

At this point, the precise effects of the tariffs on the U.S. solar market are uncertain. However, negative effects are likely to be more pronounced on commercial solar projects where CSPV modules make up a greater share of project costs. In addition, there is still a great deal of uncertainty with regards to the implementation of the tariffs. For example, how will the quota of tariff-exempt CSPV be allocated, how will the Administration deal with the possibility that production may move to countries (e.g., India and Turkey) currently exempt from the tariffs? Finally, what will the World Trade Organization do with complaints regarding the Administration’s tariffs? All of this uncertainty casts a long shadow on the potential growth of U.S. solar capacity.