The US imposed 30% import duty on solar cells and modules for four years early this year. The tariff will be decreased 5% each year and will reach 15% after four years. The domestic solar industry has already opposed the tariffs, warning of severe consequence to the industry. Since its imposition, solar energy companies cancelled or halted investments projects of more than $2.5 billion reported by Reuters.
Commodity Inside View:
The tariffs were imposed in response to the Section 201 trade case filed by Suniva, which was later joined by SolarWorld in April 2017. Suniva which is a Chinese-owned US-based solar manufacturer is so far saved from bankruptcy due to the intervention of SQN Capital Management.
The US government is justifying its tariffs by saying that the Chinese government is subsidising its solar panel industry, which is dominated by state-owned enterprises. The subsidies have negatively impacted solar panel industries in other major markets including the US.
The US is heavily dependent on the solar panels imports. So far, the imposed tariffs have shown some negative impacts on the solar energy market through rising installations costs.
Tariffs have so far supported the domestic manufacturing sector in terms of investment in supply, which is likely to increase the US panel production over the coming years. Since the impositions of tariffs, solar panel producers such as First Solar and JinkoSolar announced to invest $800 million on projects to ramp up panel production in the US. It also attracted foreign investors, for example, South Korea’s Hanwha Q CELLS announced to open a solar module factory in Georgia by 2019.
Despite these announcements, we still expect that only local supply would not be capable of satisfying domestic demand. The consequences of the protectionists’ measures for the US solar market will be more severe in the long term and constrain the demand growth.
Solar energy accounts for about 1.5% of electricity production in the US which will reach around 4.5% by 2030. The US has been trying to promote solar energy to reduce emission and further diversify its energy mix.
There is also a strong resistance across the world against the tariffs. Thailand is the latest country which has filed a complaint with the World Trade Organisation (WTO) requesting consultations and trade compensation over the 30% tariffs with the US. Numerous countries have already compliant at the WTO over the tariffs including Vietnam, Malaysia, the Philippines, Singapore, the EU, Taiwan and South Korea.
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