Work description: I researched and wrote this piece to deliver as a byline article to Boykin Industries, LLC (a PR rep working with cleantech businesses) in May of 2019. The draft went through additional revisions after this version, including changes to the working title.
Why Trump’s trade war does more harm than good for the solar industry
Trump’s trade war with China harms the solar industry, dampening its phenomenal growth opportunities. In January of 2018, president Donald Trump placed tariffs on foreign-produced solar panels, with a high tax of 30 percent. These tariffs will decline by 5 percent each year until reaching 15 percent in 2021. While Trump claims that China pays for the tariffs, in reality, the domestic companies that import cheaply manufactured goods pay the direct costs.
The solar jobs sector appears to have faced the biggest losses due to reduced demand for installation. With $2.5 billion in solar investments cancelled or delayed following the implementation of the solar panel tariff, the sector lost a total of 18,000 jobs by the end of 2018.
Nevertheless, solar development remains on the rise thanks to incentives that outweigh the setback of Trump’s trade war. Firstly, many utilities companies across the nation have created contracts for large solar projects. They want to take advantage of the full federal Solar Investment Tax Credit of 30 percent on commercial and residential installations built before 2023.
The astonishing 73 percent drop in the cost to produce solar energy from 2010 to 2018 also gave the sector a boost. Solar’s price per KwH had already fallen to $0.10 by the start of 2018, and the International Renewable Energy Agency (IRENA) report predicted that the cost of solar energy would become as cheap as fossil fuel energy by 2020.
In addition, China’s decision to remove its renewable energy subsidies in favor of competitive bidding for solar utilities dramatically reduced the costs of Chinese solar panels. As a result, an abundance of cheaply produced Chinese solar panels became available in the global market.
Though intended to protect U.S. solar manufacturers of solar panels, Trump’s solar panel tariffs have mostly hindered residential solar affordability. Roughly 80 percent of all solar panels sold in the U.S. are imported and solar panel manufacturing accounts for only 15 percent of solar jobs. The costs of the import duties are most likely getting absorbed by domestic installation firms and consumers.
For some solar industry companies, like Quick Mount PV, the aluminum tariffs have also disrupted operation costs. Quick Mount PV is an industry leader manufacturing lightweight corrosion resistant aluminum rail mounts that allow for quick and easy solar panel installation. However, in March of 2018, a few months after Donald Trump announced his solar panel tariff, he placed a ten percent tariff on aluminum and a 25 percent tariff on steel to boost the steel and aluminum manufacturing sector in the U.S.
So, on top of the solar panel installation slump, the added manufacturing cost from aluminum gives Quick Mount PV an undue burden. By focusing solely on manufacturing, the decision to impose tariffs ignores the “ripple effect” felt across the economy. Quick Mount PV faces similar cost disturbances as hardware manufacturers, commercial construction companies and even soybean farmers facing the retaliatory tariffs China placed on U.S. soybeans. According to the Washington Post, only roughly 1 job is gained for every 14 jobs lost as a result of the economic impacts of the steel and aluminum tariffs.
Policy makers have struggled to understand why Trump targeted US allies such as Canada and Mexico with the steel and aluminum tariffs. Backpedalling on his decision, Trump has recently agreed to lift Mexico and Canada’s aluminum and steel tariffs. This will improve the situation for Quickmount PV, but the pricing instability has nevertheless made day-to-day operations more expensive.
While most solar companies like Quickmount PV are still growing, the trade war has placed an unnecessary drag on growth for jobs and carbon neutral energy installation. This comes at a time when both are in high demand.