Trump Strikes China’s Economy: The Tariff on Solar Panels

China has quickly built up the world’s largest solar manufacturing industry and now dominates nearly all aspects of solar use and manufacturing. Since becoming the major player in the solar power industry, China has driven down global prices of solar panels about 90 percent. On January 22, 2018, President Trump, boasting to help American manufacturing, jobs, and trade, imposed a 30 percent tariff (border tax) on imported solar panels. The tariff gradually lowers to 15 percent over four years. Though President Trump’s decision was made after considering recommendations from the US International Trade Commission, an independent and bipartisan panel, it has been called “the biggest blow…to the renewable energy industry yet.”

Will China bear the brunt?

China not only manufactures two-thirds of the worlds’ solar panels, but it is also one of the largest purchasers of solar panels. Though this has helped curb emissions of planet-warming greenhouse gases and advancing the growth of renewable energy, it has hurt Western manufacturers. Given that 95 percent of solar panels sold in the United States (U.S.) are made abroad, this new tariff is a direct strike at China and its economy.

China’s government has played a major role in helping boost China’s position in the solar industry, by providing billions in low-interest loans to solar-panel manufactures and subsidizing manufacturers with cheap land. With this assistance, China’s solar power production exploded tenfold from 2007 to 2012, and six of the top 10 solar panel makers are Chinese. In 2016, China’s solar panel makers slashed prices around 25 percent and created a significant ripple in the solar power market. As a result, Western companies, from the U.S. to Germany, were unable to compete with the drastically reduced prices and closed. This tariff was imposed in order to curb China’s alleged unfair trade practices and export dumping, which have hurt American manufacturers.

This is not the first time the U.S. has imposed tariffs on Chinese solar panels, due to China’s artificially low-priced solar cells and export dumping. Unfortunately, those tariffs simply resulted in China’s exploitation of loopholes and the rise of factories in Southeast Asia. As a result, this current tariff is much broader than its predecessors as it hopes to prevent China’s exploitation of loopholes.

Will this help “create jobs in America, for Americans” as Trump alleges?

A Chinese economic advisor, Mr. Li, says that the U.S.’s focus on helping small American solar companies survive “hurt[s] all the users of solar energy.” As a result of the tariff, China is already threatening to fight back, saying they will work with the World Trade Organization to defend global trade and their interests against the United States’ “abuse of trade remedy measures”.

When asked about the tariff, President Trump proudly alleged that it is “going to benefit our consumers, and we’re going to create a lot of jobs…[a] lot of manufactures will be coming to the United States to build.” While American solar panel manufacturers may see a drop in foreign competition, ultimately the tariff will not have the boost President Trump promises. First, U.S. solar panel manufactures need technological advancements, not tariffs, in order to increase the efficiency of production. Second, most of the jobs in the U.S.’s solar industry are the installation of solar panels, not manufacturing. Of the 260,000 to 374,000 Americans working in solar, only a mere 38,000 actually manufacture solar panels. As a result, not all Americans are happy with the tariff, which mean increased prices for consumers.

The CEO of the American renewable energy firm, Vivint Solar, stated that these tariffs are “a direct attack on American workers.” The 30 percent tariff is likely to add between 10 and 15 cents per watt to the final installed price of solar, which may result in reduced demand for American solar industry employees. Twenty-seven U.S. manufacturers have written to the US International Trade Commission explaining their opposition to the tariff, as they may result in increasing the price of solar panels in the U.S. by more than double. With rising prices for consumers, up to 332,000 U.S. workers may be left without a job as solar panel installation in the United State halts.

Supporters of the tariff, state that just one week after President Trump’s announcement, Chinese company JinkoSolar announced its decision to invest in building a solar manufacturing plant in the United States. Unfortunately, this factory is estimated to only provide 200 jobs. 

In the long run this tariff is unlikely to have a positive effect on the U.S. solar industry, American jobs and the growth of solar energy worldwide.