A year on from the Section 201 tariffs, Trump talks trade

From pv magazine USA.

On February 6, 2018, the Trump administration implemented 30% global tariffs on imported solar cells and modules, almost a year after then-U.S.-owned Suniva filed with trade authorities requesting action. The tariffs have been one of the biggest economic hits the U.S. solar industry has suffered to date and well before they took effect, module prices had increased and projects were being delayed.

On Tuesday night, U.S. president Donald Trump continued to push his hardline trade agenda in his State of the Union speech, as American trade authorities attempted to hammer out a deal with the administration’s nemesis, China. The word “trade” appeared seven times in the president’s speech, with Trump stating: “To build on our incredible economic success, one priority is paramount — reversing decades of calamitous trade policies.”

And it is not only China in the crosshairs of the Trump administration. Under U.S. trade representative Robert Lighthizer, the White House has imposed four sets of tariffs which affect the solar industry, two of which – the Section 201 solar tariffs and Section 232 steel and aluminum tariffs – are global.

The trade talks with China are of particular importance to inverter makers. In September, the Trump administration announced 25% tariffs on inverters imported from China but then reduced the figure to 10% until formal negotiations with China are concluded. If those talks fail, tariffs will revert to 25%, affecting Chinese inverter makers seeking to ship to the United States.

Manufacturing renaissance?

The core promise of the Trump administration’s tariffs was to protect U.S. manufacturing, including in the solar industry – an odd choice, given the president’s oft-voiced preference for fossil fuel and nuclear energy.

While analysts at the time predicted there would be no solar “manufacturing renaissance” in the United States, a year later at least four new solar factories are under way, with a total 3.7 GW of new production capacity.

• Hanwha Q Cells: 1.6 GW annual capacity, Georgia
• First Solar: 1.2 GW annual capacity, Ohio
• LG: 500 MW annual capacity, Alabama
• JinkoSolar: 400 MW annual capacity, Florida

Two of the new production lines are larger than any factories built to date in the Americas, and Hanwha Q Cells’ pending module fab in northern Georgia is expected to be the largest solar manufacturing facility in the western hemisphere. On top of that, Silfab has stated it is planning a U.S. factory in collaboration with DSM, although neither the location nor capacity has been announced.

Other factors may be behind the rise of U.S. module assembly. Every manufacturer who spoke to pv magazine said their new U.S. factories would not be possible without the tax reforms pushed through by Trump in late 2017 which, among other changes, substantially lowered the corporate tax rate.

The future of U.S. factories

Yesterday marked a happier anniversary for U.S. solar: the reduction in Section 201 tariffs from 30% to 25% – the first of three planned annual declines – which will culminate in a rate of 15% for cells and modules from February 6, 2021.

However, the cost of tariffs was in many ways already substantially undermined by China’s 5/31 policy shift, which reduced public subsidies for solar installations in the world’s biggest PV marketplace, prompting a flood of surplus, low-cost modules onto the global market.

While there are solid reasons to believe all of the planned new U.S. factories will come online, none of the four have yet announced opening dates. All four are planned during a period when tariffs, having already declined, offer a short window of benefits to new production lines in the U.S.

While there is the possibility of an extension of the tariffs, any such move would happen after 2020 – and there is no guarantee Trump or Lighthizer will still be in office at that point.

While Trump remains in the White House, however, there may be no end to the trade war currently under way. During his State of the Union address, the president said he would ask Congress for new authority to slap retaliatory tariffs on nations which put trade penalties on U.S. products. Whether solar, batteries, steel, aluminum and inverters will continue to be swept up in future trade action is anybody’s guess.