At the behest of U.S. solar panel makers, President Trump has imposed steep tariffs on imported solar energy cells and panels. If his goal is to save the U.S. solar panel industry, it may just backfire.
Several countries focus on solar panel production, including China and South Korea, allowing them to produce and sell solar panels and solar cells at lower costs. According to the New York Times, the U.S. imports more than 95 percent of its solar panels, with half coming from South Korea and Malaysia, though some of those Malaysian-made panels may ultimately be coming from Chinese-owned companies.
The tariff begins at 30 percent, declining to 15 percent over four years. In an effort not to harm U.S. solar panel manufacturers that use imported solar cells—the first 2.5 gigawatts of solar cells will be exempted.
The problem with Trump’s new tariff is that the solar industry relies on massive government subsidies to survive.
As economist Steve Moore pointed out a few years ago, using U.S. Energy Information Administration numbers, federal electric subsidies per unit of production amounted to $231.21 per megawatt hour (2013 dollars). Wind power totaled $35.33, nuclear power $2.10, and oil and natural gas $0.67.
And now the Trump tariffs will likely make solar power even more expensive, necessitating even more subsidies, which likely won’t be coming—at least from this Congress.
But the solar industry faces perhaps an even bigger long-term challenge—competition from natural gas.
Even as the cost of solar panels and components rise in response to the Trump tariff, the price of natural gas has been falling over the past several years and by most accounts will either remain low or decline even more in the future.
Put the two—solar tariffs and low gas prices—together and it’s hard to see how solar survives.
The irony is, if the president were intent on killing the solar industry—rather than helping it—imposing a tariff is exactly what he’d do.