Trump’s solar tariff isn’t working out how he hoped

Workers install solar panels in Palmetto Bay, Florida a day after the Trump administration announced tariffs on imported solar equipment. January 23, 2018. CREDIT: Joe Raedle/Getty Images

A huge glut of global solar panels has led to sharp price drops that have muted the effect of the Trump administration’s import tariffs on solar.

Trade wars have unpredictable results, and solar power is a classic case in point.

In 2017, when Trump was considering putting tariffs on imported solar cells and panels, U.S. companies started buying and stockpiling foreign panels, which drove up prices. Then in January, the President imposed a 30 percent tariff.

Domestically, orders were canceled, and workers were let go, since the industry gets about 80 percent of its solar panel products from imports.

In June, Trump imposed an additional 25 percent tariff on imported Chinese solar modules as part of our growing trade war with that country.

Unexpectedly, on June 1, the Chinese government cut its own solar installation incentives sharply, to slow what the government saw as a domestic market that had been overheating. Last year alone China added a staggering 53 gigawatts (53,000 megawatts) of new solar capacity — which was more new capacity installed than any other nation had at the start of 2017.

Solar PV Capacity and Additions, 2017. CREDIT: 2017REN21 2018 GLOBAL STATUS REPORT via Forbes.

China’s move had an immediate effect, slowing domestic installation and creating a global supply glut. Within weeks, global prices had dropped 12 percent.

“If you are building a large power plant your pricing has certainly come back at least halfway to what it was pre-tariff, if not all the way,” as SunPower Corp CEO Tom Werner told Reuters Monday. “It’s muting the impact of tariffs.”

Prices could fall up to 35 percent this year. And while that is good news for those who want to install solar panels, it undercuts the supposed goal of Trump’s tariffs — to increase domestic production.

The price drop “makes domestic manufacturing that much more challenging,” said Werner. Moreover, while the California-based solar company wants to increase domestic production, it currently makes most of its products in Mexico and the Philippines. So SunPower is trying to get an exclusion from the tariffs.

“Our investment in America has been curtailed because we have to pay tariffs instead of investing,” Werner explained. “We would have added hundreds of jobs that we’re not going to add until we find out what happens with our exclusion request.”

One final complication for the U.S. solar industry are the tariffs Trump put on imported steel and aluminum, materials which are needed to make the racks that hold solar panels together. Werner said, “There’s no question it’s had an impact on the size of the American solar market.”

Trade wars have unpredictable results.