Section 201 Solar Trade Case: What Just Happened?

Last Monday, the Trump administration issued a 30 percent tariff on imported solar panels, ending months of speculation after four officials from the International Trade Commission recommended action on grievances raised by two solar manufacturers.

Many in the solar industry are upset, even if they’re not surprised by the decision. The timing shouldn’t surprise anyone either. Trump’s protectionist maneuver came days before his visit to the World Economic Forum in Davos, Switzerland. The decision also came down just days before Trump’s first State of the Union Address. Regardless of the actual facts arising from this policy shift, expect Trump to use this decision as proof of a tough stance on behalf of American companies in his address to Congress and the American people.

Trump’s government is backing up the decision with agency-level action. Rick Perry’s Department of Energy announced an initiative to invigorate domestic manufacturers, awarding $3 million to entrepreneurs entering the market. While the stated aim of these recent policy shifts is to invigorate U.S. manufacturing in the solar sector and beyond, there are signs that the effort is too little and too late. For context, China is planning to spend $177 billion on solar, to the U.S.’s $400 million in coming years, according to the Environmental Defense Fund. As has been clear for many years now, U.S. companies can provide innovation in the solar business model, but the manufacturing race has largely been ceded to China. That’s not necessarily a bad thing. It means lower systems costs and more workers on roofs to install solar PV. Those jobs, by the way, cannot be outsourced. Policymakers would do well to remember that fact.

Back to the decision at hand. The Solar Energy Industries Association predicts 23,000 jobs will be lost as a result of the decision, along with billions of dollars of investment. South Korea (read: Samsung) has already filed a complaint to the World Trade Organization. In short, people on both sides of the Pacific are irked — with 80 percent of the U.S.’s solar products coming from overseas, it’s only logical.

But then it’s logical too that a few companies are standing up for that 20 percent — specifically First Solar and Tesla, both of whom have substantial manufacturing facilities within the states and will enjoy a boon from Trump’s decision. For how long is the next question.

The last administration to enforce section 201 of the 1974 trade act was that of President George W. Bush, which sought to curtail steel imports with an 8–30 percent tariff. Similarly political motivations were behind the far-reaching judgment, which was forcibly revoked by the World Trade Organization (WTO) less than two years after it went into effect. With so many companies standing to lose from the new solar tariff, it’s a safe bet that at least one of them will challenge the decision with the WTO in pursuit of a similar revocation.

Whatever happens with the current dispute, some international manufacturers are weighing their options — with some considering (considering) opening new plants within the U.S. Asian-based manufacturers may have something to gain, bringing their formidable supply chain prowess to the U.S. to compete against smaller domestic competitors. But with other solar markets, such as Australia, experiencing robust growth, it seems just as likely that Asian manufacturers will simply focus on these opportunities rather than expending capital to make marginal gains in a restricted American market.

No matter where their fortunes fall, most people agree that the tariffs could have been higher, considering the administration that’s in power. The 30 percent duty in effect will have limited popularity from a political perspective. But ultimately this will hurt American workers and cede American leadership in the clean energy race to countries that are not placing reactionary and arbitrary restrictions on the market.