Dan Whitten is founder of Athanor Public Affairs.
With the news surrounding new tariffs proposed by U.S. manufacturers on Asian solar products, it feels like the American solar industry and the Biden administration are in an untenable position.
In short, Chinese and American negotiators are going to need to resolve this issue at the highest level, because the current tit for tat solar trade war won’t work, certainly not if we want to meet our climate ambitions. At the same time, U.S. solar companies cannot mount full-throated opposition to tariffs, given cratering solar equipment prices, market over-saturation from imports and the prevailing antipathy toward China among American manufacturers, labor groups, policymakers and others.
And, despite the justifiable praise for the Inflation Reduction Act, there are serious limits to how much of the solar supply chain the U.S. can capture.
The Biden administration has tried very hard to balance environmental objectives, U.S. manufacturing growth, national security, American economic prosperity and U.S. labor standards. But it’s a balance built on a shaky foundation. Provisions in the IRA combined with aggressive tariff policy will cause solar prices to skyrocket and you can’t drive up the cost for something that you need deployed at a massive scale to solve the climate crisis.
“Market conditions show no sign of slowing imports to the U.S. unless there are policy and trade law enforcement changes,” First Solar CEO Mark Widmar said at a Senate hearing. “The relentlessness of the Chinese subsidization and dumping strategy has caused a significant collapse in cell and module pricing and threatens the viability of many manufacturers who may never be able to get off the ground or have the ability to finance the start-up or growth of their operations.”
Meanwhile, clean energy industry leaders issued a joint release “urging the Biden administration to consider alternative solutions to address the petitioners’ concerns so that we can uplift American manufacturers and maintain a thriving clean energy economy across the value chain.”
An all-or-nothing approach toward trade with China won’t work. Yes, there are legitimate ethical concerns associated with forced labor, and yes, you should not be able to dump products on the market at way below cost. The U.S. government and the U.S. solar industry have taken steps to increase transparency and hold China and others accountable for proving they are not using forced labor. The question is, are we doing enough?
That’s why broader diplomatic efforts with China must resolve this stubborn impasse. More than forty years ago, the U.S. government decided it was OK to rely on China for significant manufacturing and mining, precisely because it was cheap. According to the U.S. Trade Representative, the trade relationship with China was valued at $758 billion in 2022, with $563 billion of that amount coming from goods imported from China.
IRA passage, coupled with a tougher stance on tariffs against China and Southeast Asian countries that rely on Chinese upstream supply chains serve to create some operating room for U.S. manufacturing to take root, but that’s not enough. These steps will drive up the cost of solar, and stunt U.S clean energy development, thereby increasing our reliance on fossil fuels, and driving up the cost of electricity in the U.S.
There is no doubt that national security demands that we substantially increase U.S. solar manufacturing and support stronger manufacturing supply chains in friendly countries. The fact is that many, if not most, of the 40 solar factories that have been announced since the IRA was enacted will never get built, and the U.S. appetite, market and infrastructure needed to build mining operations, ingots, wafers and other things that go in solar panels is virtually nonexistent. I’m not sure we can put our thumb on the scale enough to create end-to-end U.S. and U.S. ally supply chains.
Solar trade has been a precedent-setting battleground between the U.S. and China. These same or similar issues are also prevalent in electric vehicle battery manufacturing, electric vehicles, steel, aluminum, semiconductors and countless other products. U.S. Secretary of State Anthony Blinken was in China last week working on these issues, among others. Perhaps it’s naïve to think that this could happen, but for the planet, somehow, some way, we’ve got to find a way to strike a deal.
