Tariff-Free Import Hike Will Boost Maturing Domestic Supply Chain: US Solar Industry

The Kayenta Solar Plant in Kayenta, Ariz., on June 23, 2024. In late February, the Department of Energy announced that it would begin plans to provide $76.5 million to the Navajo Nation's Red Mesa Tapaha Solar Farm in southeast Utah. (Brandon Bell/Getty Images)

The United States’ $60 billion solar energy industry is poised for rapid expansion over the next decade, although American manufacturers say they’re struggling to compete with low-cost photovoltaic (PV) cell imports from Southeast Asia factories mostly owned by subsidized Chinese corporations.

The Trump and Biden administrations both imposed tariffs on PV imports to level the playing field. However, with demand for solar energy projected to climb to more than 700 gigawatts (GW) by 2033 from 200 GW in 2023, the nation’s 10,000 domestic solar companies must rely on a China-dominated supply chain to stay in business.

When President Joe Biden imposed new regulations on May 16 to shield U.S. solar manufacturers from unfair trade practices, he hinted at raising the tariff rate quota “if necessary” to maintain supply chains so local manufacturers can scale up production and develop domestic supply chains.

He did that on Aug. 12, in a proclamation that boosted the quota on imported solar cells to 12.5 GW from 5 GW, more than doubling the imports allowed without the surcharge.

The U.S. solar industry “has been making and is continuing to make a positive adjustment to import competition, shown by increased actual and planned module production; various announcements of planned domestic cell production; and improvements in several of the domestic industry’s financial, trade, and employment indicators,” Biden said.

The move was in response to an April petition from seven domestic solar manufacturers—and a May report from the U.S. International Trade Commission (USITC) citing unfair trade practices and market manipulation by Chinese companies—eluding “China-wide” U.S. tariffs by exporting solar panels and components made in Cambodia, Malaysia, Thailand, and Vietnam.

The tariff rate quota boost will provide certainty for domestic manufacturers, but could also backfire by making solar panels more expensive, stymying the Solar Energy Industries Association’s (SEIA) forecasted doubling of industry-related U.S. jobs to nearly 600,000 by 2032 from 260,000.

“There’s a fine line between supporting domestic solar manufacturing and allowing less-expensive imports to flood the market, and the Biden administration is tip-toeing it,” Renewable Energy World’s Paul Gerke wrote in an Aug. 13 analysis.

The move was applauded by the Washington-based SEIA, the national trade association for the U.S. solar industry.

The expanded tariff rate quota “provides an important bridge for module producers to access the supply they need while the United States continues to progress on solar cell manufacturing,” SEIA CEO Abigail Ross Hopper said in an Aug. 13 statement.

“This decision will help create a strong, stable module manufacturing sector that can sustain robust cell production in the long run.”

The American Clean Power Association, Interstate Renewable Energy Coalition (IREC), The Institute for Energy Research (IER), Coalition for a Prosperous America, and American Alliance for Solar Manufacturing Trade Committee were among the organizations that didn’t respond to email and phone queries from The Epoch Times on Aug. 13 and Aug. 14 or declined to comment until later this week.

The Washington-based American manufacturing trade committee includes representatives from seven leading U.S.-based solar manufacturers—Convalt Energy, First Solar, Meyer Burger, Mission Solar, Qcells, REC Silicon, and Swift Solar—that filed the April petition with the U.S. Department of Commerce (DOC).

Several members pushed for the quota to be raised to 20 GW—or eliminated—claiming increasing demand for solar would allow them to eventually be sustainable without tariffs.

First Solar spokesman Reuven Proenca told The Epoch Times in an email the company would “have no comments” on the tariff rate quota hike but would address other issues within the global solar market in the coming days.

A man installs a solar panel system on the roof of a home. (Joe Raedle/Getty Images)

Tariff Timeline

The tariff rate quota imposed under Section 201 of the 1974 Trade Act limits the amount a product can be imported at reduced duty rates during a specific period. Once the quota is reached, it can still be imported, but at a higher duty rate.

Under the Biden administration’s tariff rate quota, retroactive to Aug. 1, U.S. manufacturers can import up to 12.5 GW of solar cells a year before paying a 14.25-percent tariff.

The tariff rate quota was originally installed at 2.5 GW in 2018 by the Trump administration. Biden bumped it to 5 GW in 2021.

In June 2022, he issued Proclamation 10414, a 24-month pause in imposing tariffs on solar module and cell imports from Southeast Asia “as long as the imports are consumed in the U.S. market.”

A February 2023 report from the Office of the U.S. Trade Representative on China’s compliance with World Trade Organization compacts determined that tariffs won’t deter China’s heavily subsidized manufacturing industries.

Conversely, a March 2023 USITC report countered that tariffs “led to significant increases in domestic production in the tariffed industries that were analyzed.”

If all U.S. developers were to domestically source 55 percent of manufactured solar goods, the solar industry would support 900,000 jobs by 2035, according to a June 2023 study by the Blue Green Alliance.

That same month, a Cornell University study determined onshoring the solar supply chain could cut 30 percent of global solar manufacturing emissions generated by shipping materials to manufacturing plants and then exporting those finished products overseas.

Energy costs account for about 40 percent of the cost of solar panels, assorted studies maintain.

The DOC issued a final determination in August 2023 that Chinese-based manufacturers were circumventing tariffs on solar cells and panels by shipping their products through Cambodia, Malaysia, Thailand, and Vietnam.

In January 2024, Sens. Marco Rubio (R-Fla.), Sherrod Brown (D-Ohio), Jon Ossoff (D-Ga.), and Raphael Warnock (D-Ga.) in a joint appeal called on Biden to raise tariffs on solar panels and components from subsidized Chinese manufacturers.

In their letter, they noted in 2023, the price of manufacturing a solar panel in China fell to 15 cents per watt, more than 60 percent less than in the United States.

“By 2026, China will have enough capacity to meet annual global demand for the next 10 years. This capacity is an existential threat to the U.S. solar industry and American energy security,” they wrote.

On April 24. American Alliance for Solar Manufacturing Trade Committee member companies filed antidumping and countervailing duty petitions with USITC and DOC to investigate potentially illegal trade practices in Cambodia, Malaysia, Thailand, and Vietnam by primarily Chinese-headquartered companies.

They called on the administration to “signal that the United States will not be a dumping ground for foreign solar products,” which has “led to a historic glut of solar panels believed to be sold at prices below the cost of production.”

On May 16, Biden responded by imposing new regulations to protect U.S. solar manufacturers and said a tariff rate quota bump would be considered—the one he authorized on Aug. 12.

The SunPower logo outside of its building in Austin, Texas, in April 2019. (Google Maps/Screenshot via The Epoch Times)

Complex ‘Tariff Landscape’

Regardless of what actions the United States and European Union take, energy research firm Wood Mackenzie forecast in November 2023 that Chinese-owned companies will still dominate more than 80 percent of global solar panel production through 2026.

San Francisco-based SPV Market Research founder Paula Mints told The Epoch Times the “U.S. tariff situation is a bit more complicated” than black-and-white analyses suggest.

Mints said the growing U.S. solar market is drawing global investors, including from China. At least seven China-based companies with domestic subsidiaries are building, or have built, solar manufacturing plants in the United States in the past few years.

“China-based manufacturers are not the only ones building solar manufacturing in the United States,” she said in an email, citing South Korea’s Hanwha, Switzerland’s Meyer Burger, and Singapore’s Maxeon among foreign companies building U.S. solar manufacturing plants.

“So, the [tariff rate quota] question should really apply to all of them,” Mints said. “The quota hike, 12.5 GW of cells, is low, given the 30 GW of available module assembly capacity” already imported.

Critics, such as financial adviser Peter Schiff, are concerned that the Biden administration’s efforts to promote domestic solar manufacturing through “protectionist policies” may cause solar panel prices to soar, making them unaffordable and, thus, suppressing demand.

“The recent bankruptcy of 39-year-old SunPower highlights how government intervention backfires,” Schiff said in an Aug. 13 post on X.

“Biden wants green energy made in America, so he imposed heavy tariffs on imported solar panels. The higher cost made installing them uneconomical for customers. So demand collapsed.”

SunPower, a leader in U.S. solar energy development for decades, declared bankruptcy on Aug. 5.

It attributed its struggles to interest rates and net metering changes in California, not lower-cost Chinese imports, but critics such as Schiff say the administration’s actions didn’t make them more competitive.

“The cost of solar panels went up. So as demand fell, so did SunPower’s sales and revenue. So they went bankrupt,” he wrote.

“Higher interest rates also make financing more expensive solar panels even more expensive. So it wasn’t just the tariffs. But the tariffs were a major factor.”

Trump generally favors broader use of tariffs than both Biden and 2024 Democrat presidential nominee Vice President Kamala Harris do, but it’s unlikely solar tariff rate quotas will be a campaign issue, Mints said.

“Tariffs on imported solar cells, modules, and, in the future, polysilicon, and wafers will remain part of the U.S. solar reality no matter which candidate wins the 2024 presidential election.”