Time to Slap a Tariff on Chinese Solar Panels?

workers installing solar panels

Recently a trade complaint has been lodged against China for their exportation of solar panels to the US, which could have large consequences if tariffs are enforced as a result. Companies such as SolarWorld who are a part of the Coalition for American Solar Manufacturing are campaigning for healthy competition, domestic manufacturing and sustainable production. Due to the amount of solar panels imported from China, this could have far reaching consequences for the entire US solar industry, benefiting some companies while negatively affecting others.

At present, China is producing commercial solar panels at a much lower cost than US manufacturers, and are therefore able to flood the US market with their cheaper product. This is preventing US manufacturers like SolarWorld from being able to compete and, thus, create jobs. For years, various governments have preached about the benefits of globalization and free markets but have failed to consider the effects on their own manufacturing sectors.

One of the reasons why the US government may have ignored the struggles of the solar panel manufacturing sector is the benefits reaped by solar panel installation companies. From their perspective, they welcome cheap Chinese solar panels as a way to lower their own costs and to maximise their profits. This has been helping to fuel the considerable growth in the US solar industry and many installation companies now fear the increased cost of purchasing solar panels. This could lead to jobs being lost in the installation sector and a possible rise in cost for consumers.

It’s clear that the government has a very difficult choice to make, in order to protect their own solar manufacturing companies, a tariff needs to be introduced but the size of the tariff is key. It must be a size that allows these US-based companies to compete with their Chinese counterparts but at the same time it must not hinder trade relations with China. China has a massive economy and US corporations are all too aware of the profits that can be made by taking advantage of Chinese labour.

Tariffs will encourage installation companies to source their solar panels from US-based companies as the difference in price from Chinese panels should be negligible. In turn, this should create jobs in the manufacturing sector and give companies the capital to invest in technology and possibly lower their own costs. For consumers, installation companies will pass on this increased cost through price rises and the growth of the US solar panel industry will predictably slow down. However, by purchasing US goods, this will keep more capital in the US economy and hopefully help the current economic situation.

Ryan Shipley believes that investment in renewable energy is important to lower carbon emissions and remove our dependence on non-renewable sources that pollute the environment. He currently works for All Eco Energy.

Image credit: Presidency Maldives via photopin cc

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