It wants trade protection. Is President Trump willing to go along?
Here’s a dilemma for you: what does President Trump do when the solar panel manufacturing industry asks for trade protection? That’s not just a humorous exploration into Trump’s trade philosophy, it’s a real question that could soon come to his desk in the Oval Office. Though Trump has never been gun-shy on imposing tariffs against those he sees as engaging in “unfair” trade practices, his tariffs have had some predictably bad results for the American economy in the past. Solar tariffs would be no different, and Trump should refrain from propping up solar companies that can’t survive on their own at the expense of American energy innovation.
The proposal for tariffs was put before the United States International Trade Commission by two bankrupt solar panel manufacturers, Suniva and SolarWorld. They argue that foreign companies have been “dumping” low-price solar panels on the United States, which is causing American companies such as themselves to go out of business. To protect them, they say, the United States must implement tariffs on imports of solar modules of 40 cents per watt and a floor price of 78 cents per watt.
However, the Solar Energy Industries Association (SEIA) counters that foreign imports are not to blame. According to the SEIA, Suniva and SolarWorld failed not because they were driven out by foreign competition, but because they were inefficient and unable to keep up with demand from the growing domestic solar industry. As Matt Nicely of the SEIA puts it, “Have some companies failed? Yes. But that’s the core nature of a high-tech industry; you must innovate to keep up, and deliver quality, reliable products, at scale. The Petitioners failed badly, and their failure has nothing to do with imports.”
With this statement, Nicely touches on the core problem with tariffs on solar panel imports. While it is true that the solar industry has enjoyed massive subsidies that help keep it afloat, it has also benefited from innovation that has lowered costs and made it more of a viable energy source. This innovation must continue if solar energy is to become competitive with fossil fuels, particularly without the aforementioned subsidies. Industries that are not protected by tariffs must continue to innovate and improve in order to compete with foreign importers, or else what has happened to Suniva and SolarWorld will happen to them. Remove the threat of foreign innovation surpassing American companies’ innovation, and American companies lose that incentive to innovate.
“Innovation” can be abstract and hard to quantify, but there are plenty of concrete economic harms that solar tariffs would cause. One estimate suggests that the tariffs that Suniva and SolarWorld are requesting would have devastating consequences for the size of the solar grid, resulting in solar energy production falling from 72.5 gigawatts to 25 gigawatts by 2022. Massive jobs growth in the sector could also be reversed. Between 2010 and today, the solar industry has grown from 93,000 jobs to 260,000 last year. The SEIA estimates that Suniva and SolarWorld’s tariff would cut 88,000 jobs from the industry in the next year alone. Also, the solar industry would have to pay an artificially higher cost for new solar panels. That cost would be passed on to the consumer, causing solar prices to double.
Such large economic costs to save two failed companies is a cost that the American people cannot afford. American energy consumers deserve access to as many options as the market can provide without the market being distorted to protect companies that can’t stay afloat. If the proposal to impose tariffs on foreign solar importers comes to Trump’s desk, he should not hesitate to toss it in the trash.