Pros and Cons of President Trump's New Solar Tariff

With energy conservation being at the forefront of our future, the specifics of President Trump's new solar equipment tariff are of particular interest to those affected both home and abroad, for different reasons. The value of solar energy cannot be understated for its advantageous relationship with utility management, however acquiring the necessary panels is not as simple as we would like. Roughly 80 percent of the pieces used to construct solar panels are imported from other countries, with Asian territories especially contributing to their makeup. Taxing imported goods is nothing new to our economy, however President Trump's new 4 year equipment tariff has been met with opposing viewpoints. The tariff places a tax on the imported parts that begins at 30% and declines at a gradual rate to 15%. Proponents of the tariff are resolute in their belief that it will raise the percentage of solar manufacturing done in America and positively effect our economy accordingly. Conversely, some warn that it could actually hurt workers and companies on our own soil, delivering the opposite intended outcome.


Why Was The Tariff Implemented?

Those skeptical of President Trump's motivations cite that his administration has never been ardent supporters of renewable energy, pointing directly to his tax reform bill as proof. Solar and wind companies in the bill have been hampered financially, leading credence to those who say he wants to roll back laws regarding power plant emission. Pulling the United States out of the Paris Agreement also did not demonstrate a conviction to the cause, though others say the reasons are far more complicated. For what it's worth, President Trump's camp maintains the tariff is consistent with his stance on being strict with China. Because China constructs so many solar cells, the logic makes sense in Trump's vocal endgame of wanting to protect American manufacturers in the long run. In theory, the tariff increasing cost of solar parts obtained from foreign countries should cause a spike in American solar companies buying locally within the United States. This of course could make solar manufacturing boom in our home land.


Reaction Remains Divided On Trump's Tariff

There are two schools of thought on the recent inclusion of the solar panel tax under Trump: Parts manufacturers based in the United States steadfastly believe it will help their bottom line with their direct competition being bogged down by higher prices. On the other side of the coin, American solar companies that bring in their parts from foreign distributors have the very real worry of rampant job loss for up to 23,000 people, according to The Solar Energy Industries Association. Additionally, these companies are concerned that their own costs will in fact go up, and that job gains will never be able to offset the ones lost since so much of production is automated. "Rolling Stone" opines that this surge in cost will make the United States even more reliant on coal, which introduces a myriad of other problems. Those 'in the know' in the industry also predict a 3-10% increase in the cost of solar panels themselves, which will slow things to a crawl until businesses can adjust to the jump in prices accordingly.


What Does Solar's Future Hold?

Despite peeling back the onion on the pros and cons of Trump's new equipment tariff, few argue that solar will not be our model of efficiency going forward. The hope is that with experience in dealing with the tax, companies will learn to adapt to the ever-changing business of parts acquisition and production. Ultimately, gossip is nothing more than speculation, and only with time will the tariff's true impact be seen as it molds the innovation of home energy saving.


Curt Newton's picture

The topic of Trump's solar

The topic of Trump's solar tariffs came up in a few panels and talks at last weekend's MIT Energy Conference.

Consensus seemed to be that in terms of long-term solar deployment, the tariff will ultimately be just a short blip or a bump in deployment rates, though the loss of installer jobs and income due to that blip will be felt more strongly.

Much bigger and more important issues for US solar deployment are on the horizon. Market and utility regulatory reform is needed to remove artificial barriers (like net metering caps) to bringing more solar energy into the grid. We need to be ramping up storage at different scales, to help solar energy generation better meet the timing of customer demands. And while the rate of silicon solar cost reductions may be leveling off (or tariff bumping-up), other technologies are in the wings which could continue to drive installation costs even lower. Changes like these will help boost solar energy's actual value in the market; see Varun Sivaram's "Can't Stop the Shining."

Rajesh Kasturirangan's picture

It's a real dilemma.

Thank you for a well thought out piece Homer. You raise many interesting points that point to a real dilemma. 

Personally, I think the basic factors of human existence - food, energy, shelter etc - should be sourced and consumed as locally as possible, so it's important in the long run for the US (and China/India/Japan/Europe) to have a strong local energy economy, including solar manufacturing. Of course, that may mean coal will become cheaper than solar once again, just at a time when the tide is turning. Could that be fatal to the solar energy surge? I hope not, and given the investment in this sector, I hope it spurs more innovation. Nevertheless, energy globalization in the name of renewables strikes me as the wrong direction in the medium-long run.  

Rick Shankman's picture

“Why are two bankrupt solar

“Why are two bankrupt solar companies seeking a bailout that would kill their industry?... The answer is their hedge fund backers.”
See... “... Today, two bankrupt companies — the Chinese-owned Suniva and German-owned SolarWorld — will participate in a public hearing at the U.S. International Trade Commission, a federal agency that investigates and makes recommendations to the president on trade issues. Today's Suniva petition asks the government to impose tariffs that would more than double the current market price for solar panels.... If it seems unbelievable that two bankrupt companies on their way out would be willing to tank an entire American industry, then consider this: In May, SQN Capital sent a letter to the Chinese Chamber of Commerce suggesting that if the Chinese government would pay SQN $55 million, SQN would drop this case and liquidate Suniva, laying off all of its workers. Our entire industry knows that this trade case isn't about creating jobs or bringing back investment. That's why no actual American solar company is backing it. No, this case is about two bankrupt foreign companies and their hedge-fund backers seeking a multimillion dollar bailout, at the expense of hundreds of thousands of American workers in the thriving solar industry.”