Tariffs aimed at protecting the U.S. solar industry from foreign competition were reinstated Thursday, ending a two-year moratorium approved by President Biden as part of an effort to speed up solar adoption in the United States.
The tariffs apply to certain solar power products made by Chinese companies in Southeast Asia and come amid growing global concern about the proliferation of Chinese-made solar products that are cheaper than those from U.S. and European manufacturers.
The Biden administration has tried to nurture the U.S. solar industry by offering tax credits, and companies have announced more than 30 new investments in U.S. manufacturing over the past year. But U.S. solar companies say they are still struggling to survive as competitors from China and Southeast Asia flood the global market with solar panels, selling at prices far below what U.S. companies need to charge to stay in business.
That leaves President Biden with a tough choice: continue to welcome the cheap imports that are helping move the U.S. away from fossil fuels, or block them to protect new U.S. solar power plants that are profiting from taxpayer money.
The tariffs that take effect Thursday embody this dilemma. The tariffs, which apply to certain solar-power products imported into the United States from Cambodia, Thailand, Malaysia and Vietnam, were approved two years ago after U.S. officials determined that some Chinese companies were trying to avoid tariffs already imposed by the U.S. on China by shipping solar panels through other countries. The exact rates vary by company, but could exceed 250%.
While Chinese companies had set up factories in Southeast Asia, Commerce Department officials said some of the companies did not conduct full-scale manufacturing there. Rather, the ruling found that the companies were making minor improvements to Chinese-made solar products in factories in those countries and then shipping them to the U.S. duty-free.
These products would have been subject to additional tariffs, but the Biden administration made the unusual decision in June 2022 to suspend the tariffs for two years to ensure the U.S. continues to have access to sufficient solar panels. Congress passed a resolution to reinstate the tariffs last year, but Biden vetoed it.
The administration described the decision to suspend the tariffs as a compromise. Groups such as the American Clean Power Association, which represents solar power and energy storage companies, had argued that imposing the tariffs would hurt U.S. efforts to combat climate change. But the decision angered many of the domestic solar manufacturers that the Biden administration also wanted to help.
In the two years since the Biden administration decided to suspend the tariffs, solar power prices have plummeted and imports of solar panels have soared.
Danny O'Brien, corporate president of Q Cells, which makes solar panels in Georgia, said the company has nearly two years' worth of subsidized imported solar panels in U.S. warehouses. “We welcome President Biden's important steps to level the playing field,” he said. “But the Biden Administration's industrial policy needs to go further and be stronger if we want to build a durable domestic supply chain that meets our climate goals, continues to create jobs, and strengthens our energy security.”
Over the past year, Biden administration officials have become increasingly vocal about the risks posed by imports and the need to protect emerging factories in key election states.
Treasury Secretary Janet L. Yellen spoke in March at a Norcross, Georgia, facility for Suniva Inc., a struggling solar manufacturer that received subsidies through the Inflation Control Act of 2022. Ms. Yellen noted that the company, which filed for bankruptcy in 2017, has restarted solar cell production this year.
But she also suggested such investments could be threatened by excess industrial capacity in Chinese green energy technologies. “Chinese excess capacity is distorting global prices and production patterns, harming not only American businesses and workers, but businesses and workers around the world,” she said.
The Treasury Secretary brought up Suniva again in April at a news conference in Beijing where he met with Chinese government officials, recalling that Suniva's financial troubles began more than a decade ago, when China began expanding production of cheap solar panels.
The company is now receiving more support from the U.S. government, but “China's continued investment in these regions outpacing growing global demand could really start to pose a threat to companies like this,” she said.
It's not yet clear how many Chinese companies shipping products through Southeast Asia will still face tariffs, or if they will face any at all. Many have set up factories there over the past two years, and could argue they are doing substantial manufacturing there rather than avoiding tariffs by shipping products through those countries, industry executives said.
Meanwhile, U.S. solar manufacturers are beginning to push for broader protections. In April, a group of U.S. solar manufacturers filed a new set of lawsuits with the Commerce Department and the U.S. International Trade Commission, seeking investigations into unfair subsidies and pricing practices by factories in Cambodia, Malaysia, Thailand and Vietnam.
The committee is due to make its initial determination on Friday whether U.S. companies have been harmed by the practices, which could lead to additional tariffs on imports from Southeast Asia, the source of most U.S. solar panels.
“We don't believe the lifting of the tariff exemptions will have a significant impact on Chinese-owned and China-headquartered companies, as they have already adjusted production to avoid the evasion lawsuits,” said Timothy Brightbill, an attorney at Wiley Lane LLP who is representing U.S.-based solar manufacturers in the new lawsuit. “Our lawsuit is extremely important because it picks up where the evasion lawsuits left off.”
The tariff spat highlights the dilemma facing the United States as it tries to cut ties with China, which will be particularly difficult in environmental industries where China dominates global production, including solar panels, critical minerals and electric vehicle batteries.
China accounts for more than 80% of the world's solar power supply at every stage of the production chain, from polysilicon raw material to the finished panel.
Significant support from the Chinese government and the massive economies of scale achieved by Chinese industry have allowed Chinese manufacturers to offer products at extremely low prices: Solar modules cost just 9-11 cents per watt in China, compared with 28 cents for modules made in Southeast Asia and shipped to the U.S., according to data from Wood Mackenzie.
Those low prices have sparked a surge in imports: The U.S. will import a record 54 gigawatts of solar panels in 2023, up 82% from 2022, according to data from S&P Global.
Some argue the U.S. should take advantage of these low prices to expand its solar power supply. But the oversupply is jeopardizing Biden's plan to revive green-energy manufacturing in the U.S. It's discouraging some new manufacturers from opening facilities in the U.S. In February, Massachusetts-based Cubic PV Inc. called off plans to build a solar-wafer factory, citing plummeting prices.
“Despite the passage of the IRA, the U.S. solar manufacturing industry remains in a precarious position,” Mark Widmer, CEO of U.S. solar manufacturer First Solar, testified at a Senate hearing in March.