Tariffs and the Green Agenda

Eakinomics: Tariffs and the Green Agenda

Tariffs are among the most contentious policy legacies of the Trump era and represent a difficult challenge for the Biden Administration. Among the most immediate are tariffs on solar cells and modules, especially on those components used in utility-scale (as opposed to residential) power generation. AAF's Ewelina Czapla and Tom Lee nicely review the issue, but the basic argument is simple.

The Trump tariffs have raised the cost of solar electricity generation in the United States by allowing for higher prices for domestic manufacturers and – much more important on modules that have no domestic supply – raising the cost of imports. The chart (below) is reproduced from Czapla and Lee. It shows that the average monocrystalline solar module prices per watt was essentially twice as high in the United States as elsewhere.
 

Meeting the emissions targets of the Biden climate initiative will dramatically raise the demand for solar just as U.S. supply growth is expected to stagnate. (See chart, below.) Czapla and Lee note: “The increased costs and prices due Section 201 tariffs are certainly one of the main reasons for this stagnation. These developments ultimately lead to an economic opportunity cost. Downstream portions of the supply chain and end users of solar cells modules suffer the most due to increased input costs, which will in turn possibly force them to forgo new hires and projects simply to contain the increased costs due to these tariffs. According to the Solar Energy Industry Association, after only two years, the Section 201 tariffs resulted in the loss of 62,000 jobs, as well as the loss of 10.5 gigawatts of solar generation capacity and $19 billion of private investment."



One might understand a slow approach to reversing Trump’s tariffs on Chinese products. But there is no reason to hesitate to remove others, and the solar tariffs are a prime example.