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US Waives Tariffs, Mobilizes Domestic Production to Boost Solar Industry

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It’s the story of shady behavior and a plan that fizzled out.

On Monday, the White House announced it would temporarily remove some tariffs on solar panel imports to quell a heated dispute in the solar industry between domestic and foreign manufacturers. Nearly two-thirds of U.S. solar installations this year are at stake.

They’ve seen better rays

The story of solar installations in the United States is one of rigid government action and unintended consequences. In 2012, the Commerce Department imposed aggressive tariffs of up to 250% on Chinese solar panels after finding that Chinese manufacturers were flooding the market with low-cost subsidized panels.

The move was intended to reduce China’s dominance in the domestic market, but US solar production grew only modestly in the wake. Instead, Cambodia, Malaysia, Thailand and Vietnam have almost entirely filled the void, accounting for 85% of U.S. solar installations in 2021, according to analysts at Rystad Energy.

Or so it seemed. In March, US manufacturer Auxin Solar alleged that Chinese companies were clandestinely operating many solar factories in Southeast Asia to circumvent US tariffs. The fallout from the indictment threatens to derail much of the current solar industry and has triggered a new round of regulatory actions and market consequences:

  • A Commerce Department investigation into Auxin’s allegations has spooked importers, who now fear they may be liable for $3.6 billion in retroactive tariffs for potentially fraudulent imports. The result: widespread interrupted orders, with 64% of solar installations planned for 2022 now at risk of cancellation – devastating solar installations and putting thousands of jobs at risk.
  • In an attempt to mitigate the damage, the White House on Tuesday waived tariffs on panels from Cambodia, Malaysia, Thailand and Vietnam for two years to give confidence to importers amid the investigation. To further stabilize the domestic solar market, the White House also invoked the Defense Production Act to allocate resources for domestic manufacturing.

Rystad said that, in the best-case scenario, U.S. solar manufacturers would expand to make up for potential imports lost to tariffs by 2024. The White House said it expects solar manufacturing nationwide triple by that year, enabling 3.3 million homes to switch to solar power. every 12 months.

The winners are? U.S. solar companies SunPower, Enphase Energy, Sunrun, NextEra and Southern Company rose after the news broke, and industry group Solar Energy Industries Association welcomed the move. But panel maker First Solar, whose shares have fallen, complained that Monday’s announcement “undermines American solar manufacturing” while Auxin blasted the decision as opening “the door wide for special interests funded by China”. It’s no surprise that everyone in the solar industry thinks it’s all about them.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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