Tariffs aimed at protecting the U.S. solar industry from foreign competition went back into effect Thursday, ending a two-year pause that President Biden approved as part of his effort to slow solar adoption to get a flying start in the US.
The tariffs, which will apply to certain solar products from Chinese companies in Southeast Asia, have been introduced at a time of growing global concern about a wave of cheap Chinese solar products that are undercutting U.S. and European manufacturers.
The Biden administration has sought to build the U.S. solar industry by offering tax breaks, and companies have announced more than 30 new U.S. manufacturing investments in the past year. But U.S. solar companies say they are still struggling to survive as competitors in China and Southeast Asia flood the global market with solar panels sold at prices far below those U.S. companies must charge to stay in business.
That has forced President Biden to make an uncomfortable choice: continue to welcome cheap imports that will help the United States transition away from fossil fuels, or block them to protect new American solar factories that benefit from taxpayer money.
The tariffs that take effect Thursday include that dilemma. The tariffs, which apply to certain solar products coming to the United States from Cambodia, Thailand, Malaysia and Vietnam, were approved two years ago after U.S. officials assessed that some Chinese companies were trying to avoid pre-existing U.S. tariffs on China by installing solar panels. through other countries. The exact rate depends on the company, but can be more than 250 percent.
The Chinese companies had set up factories in Southeast Asia, but Commerce Department officials said some were not conducting substantial production there. Instead, they used sites in those countries to make minor changes to Chinese solar products, then ship them to the United States tariff-free, the ruling said.
Those products should have been subject to additional tariffs, but the Biden administration made the unusual decision in June 2022 to temporarily suspend them for two years to ensure that the United States would still have access to enough solar panels. Congress passed a resolution last year to reimpose the tariffs, but Mr. Biden vetoed it.
The government described the decision to suspend tariffs as a compromise. Groups like the American Clean Power Association, which represents solar and energy storage utilities, 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 because the Biden administration also wanted to help.
In the two years since the Biden administration made the decision to pause tariffs, solar prices have plummeted and solar panel imports have soared.
Danny O’Brien, president of corporate affairs for Qcells, which makes solar panels in Georgia, said there was nearly two years’ worth of subsidized, imported solar panels sitting in U.S. warehouses. “We welcome President Biden’s important steps to level the playing field,” he said. “But if we want to build a sustainable domestic supply chain that meets our climate goals, continues to create jobs and contributes to our energy security, the Biden administration’s industrial policies will need to evolve and be strong.”
Over the past year, Biden administration officials have become increasingly vocal about the risk posed by imports and the need to protect emerging factories, some of them in key electoral states.
In March, Treasury Secretary Janet L. Yellen gave a speech in Norcross, Georgia, for Suniva, a troubled solar manufacturer that has received subsidies through the Inflation Reduction Act of 2022. Ms. Yellen noted that the company, which filed for bankruptcy in 2017 , this year the production of solar cells is restarting.
However, she also suggested that such investments could be jeopardized by China’s excess industrial capacity in green energy technology. “China’s excess capacity is distorting global prices and production patterns, hurting American businesses and workers, as well as businesses and workers around the world,” she said.
The finance minister raised the Suniva case again in April at a press conference in Beijing, where she met with senior Chinese officials. She recalled that Suniva’s financial troubles began more than a decade ago when China began ramping up its production of cheap solar panels.
Although the company now has more support from the U.S. government, she said, “the continued investments in capacity in these areas of China, which are outpacing growing global demand, could really threaten a company like this.”
It is not yet clear how many of the Chinese companies that ship their products through Southeast Asia will still face tariffs, if any. In the past two years, many have built factories in Southeast Asia, allowing them to claim they are doing substantial production there and not just avoiding tariffs by routing goods through those countries, industry executives say.
Meanwhile, U.S. solar manufacturers have begun pushing for broader protections. In April, a group of U.S. solar manufacturers filed another series of cases with the Commerce Department and the U.S. International Trade Commission, asking them to investigate unfair subsidies and pricing practices by factories in Cambodia, Malaysia, Thailand and Vietnam.
The commission will make an initial decision Friday on whether U.S. companies have been harmed by these practices. If it decides this is the case, additional duties could be imposed on imports from Southeast Asia, the source of the majority of U.S. solar panels.
“We don’t expect the lifting of the tariff exemption to have much impact because Chinese companies and Chinese-headquartered companies have already adjusted their production to avoid the circumvention case,” said Timothy Brightbill, a lawyer at Wiley Rein. which in the newer case represents US-based solar energy producers. “Our case is extremely important because it more or less picks up where the circumvention case left off.”
The back-and-forth over tariffs highlights a dilemma facing the United States as it attempts to sever some ties with China. Cutting ties has been especially difficult in green industries where China dominates global production, such as solar panels, crucial minerals and electric vehicle batteries.
China accounts for more than 80 percent of the world’s solar energy supply at every stage of the production chain, from the raw material polysilicon to the final panels.
Substantial support from the Chinese government – as well as the enormous economies of scale that the Chinese industry has achieved – have enabled Chinese manufacturers to offer their products at extremely low prices. According to data from Wood Mackenzie, solar panels in China cost just 9 to 11 cents per watt, compared to 27 to 33 cents per watt for modules made in the United States. Many U.S. factories currently sell modules at cost or negative profit margins to compete with imports, Wood Mackenzie said.
These low prices caused an increase in imports. The United States imported a record 54 gigawatts of solar panels in 2023, an 82 percent increase from 2022, according to data from S&P Global.
Some argue that the United States should simply take advantage of these cheap prices to expand its solar energy supply. But the glut also jeopardizes Biden’s plans to revive green energy production in the United States. Some new manufacturers have been discouraged from opening facilities in the United States. In February, a Massachusetts company called CubicPV Inc. canceled. plans to build a solar wafer factory, citing collapsing prices.
Under the rules, companies technically must install any solar panels they brought into the United States before December tariff-free, or they will end up paying retroactive tariffs.
“It’s now a battle for companies to use up their shares over the next six months,” said Mona Dajani, global co-chair of energy infrastructure and hydrogen at Baker Botts. “Many in the industry will certainly be keeping an eye on how this will impact installation and pricing figures in the coming weeks.”