The US Department Of Commerce has introduced new tariffs via a June 2 ruling on solar panels imported from China. GTM Research’s research paper states that it will increase the cost of modules exported to the US by 14%. Chinese suppliers have historically lowered solar panel prices in the US by as much as 25%, helping the solar industry to grow. However, there is more to this than meets the eye.
Estimated delivered Chinese module prices under various strategies. Image Credit: GTM Research.
The research paper is titled The 2014 U.S. China Solar Trade Dispute: Status, Strategies and Market Impacts, and it states that this ruling may cause suppliers to not only increase the cost of delivery to the US, but seek alternative value chain strategies.
According to Greentech Media:
If the eventual margins, including both the countervailing duty and antidumping components, exceed the preliminary countervailing duty margins of 27 percent on average, suppliers are unlikely to preserve their previous shipment strategies. GTM Research expects that some suppliers will elect to ship all-China products into the U.S. and pay the under-order import tariffs imposed in the 2012 solar trade case, while others will sell via internal or OEM manufacturing in locations such as India, South Korea, Poland or Mexico.
Chinese companies supplied 31 percent of the modules installed in the U.S. in 2013, and more than 50 percent in the distributed solar market. The report finds that non-Chinese suppliers are likely to gain share as a result of the erosion of Chinese price advantage in the U.S. market. Likely beneficiaries include REC, SolarWorld, Suniva and LG Solar in the distributed solar market, and First Solar in the utility market.
While a 7 percent to 20 percent increase in module prices from Chinese suppliers will have reverberating effects throughout the U.S. solar market, it will be most disruptive in the highly cost-sensitive utility solar market. GTM Research expects some projects to seek alternate module suppliers, while others may fail entirely.
Was The Government Right To Impose These Tariffs On Chinese Solar Panels?
Foreign policy is a very complicated, sensitive, and controversial matter, so i’ll leave you with my thoughts and you’ll decide.
I do think that the tariff will increase the cost of Chinese solar modules, it might negatively affect America’s relationship with China, and it will make solar panels more expensive to purchase overall. However, another side of me wants to invest in the US economy more and stimulate it.
How can these two views coincide?
First, the money spent on Chinese solar panels goes to China’s economy, not the US economy, so despite the fact that Chinese solar panels are cheaper, they would not provide the same job creation benefits for Americans as locally manufactured solar modules would.
When faced with decisions like these (buying American vs Chinese-built solar panels), it is imperative that we understand the flow of money. If you purchase solar panels from an American company that has their panels manufactured in China (this is the most common scenario at the moment), then the American company and their employees will benefit from that. However, some of that revenue has to go to the Chinese factories that built them.
If you purchase from an American company that manufactures in the US, the American company will enjoy all of the above benefits mentioned, and to top it off, it would stimulate manufacturing job creation in the US.
There’s one other very important point as well: if these tariffs drive up costs much (which it seems they are doing), that will result in lower demand and fewer jobs in the solar installation and other downstream solar markets. Many have argued that the job losses in these markets are great than the job gains in the manufacturing market.
Apart from that, the potential of these new tariffs to negatively affect US-China relations should be taken into consideration. The tough question is: Is this tariff worth it?
If you have anything to add to this debate, sound off in the comment section. I would love to hear your thoughts!
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