Could America’s 250 Percent Tariff on Chinese PVs Help the Mideast?

The United States Department of Commerce ruled yesterday that Chinese photovoltaic panel prices were below production costs and therefore their sale constituted dumping.   Proposed antidumping tariffs ranged from 31 percent to 250% and would come into force sometime after October 2012.  The tariff is expected to significantly increase the cost of solar installations in the US.  This ruling was widely praised by struggling US photovoltaic manufacturers, several of which are on the brink of bankruptcy as solar panel prices dropped below $1 per watt.  Others, such as Tom Gutierrez, chief executive officer of GT Advanced Technologies Inc. (GTAT) have a different view.  In a recent interview he said, “The war we are fighting is a technology war.  If we get stuck protecting low level assembly jobs, we lose on the future.”

Are Solar Tariffs Self Destructive?

This debate has replayed itself many times over the last half century.  Would higher tariffs against Japanese microchip dumping in the 1990s have saved the US chip industry while preventing the rise of Microsoft, Apple, Google and hundreds of other Silicon Valley software companies?  Did Bush era steel tariffs save a few hundred steel industry jobs at the expense of hundreds of thousands in the domestic auto industry?

Will  American solar installation jobs disappear because photovoltaics are now only cost effective in other countries?   Will oil-dependent U.S. companies be able to compete on the global market when other nations can power their industries with cheap imported solar panels?

$1 per watt should have been old news

No one should have been surprised by the rapidly falling price of solar panels.  In fact, if photovoltaics had followed the trend line of other silicon wafer technologies (e.g. microchips), their cost would have fallen below $1 per watt years ago.  Given the mathematics of Moore’s law, what looks like dumping now will be ridiculously overpriced in 18 months.  One wonders if the tendency for US companies to form massive oligopolies is what leads to their sluggish response to a changing world.  Detroit automakers were blindsided twice by high oil prices.  Is the US solar industry repeating history?

Tariffs are generally bad for all parties involved.  China can be expected to retaliate with its own tariffs against US products as shots are fired in what could become a full-fledged trade war.  The Smoot-Hawley Tariff Act of 1930 is widely regarded as a significant factor in deepening the Great Depression.

But could US solar tariffs help the Middle East?  Certainly those in the oil industry should cheer for anything which raises the cost of solar in the US and removes solar’s threat as a competing energy source there.

Isn’t oil dumping more of a threat to the solar industry?

President Obama recently begged Saudia Arabia to dump shiploads of oil into the US market.  Arguably, cheap oil is a much bigger threat to the fledgling solar industry than a little friendly competition from photovoltaic manufacturers in the far east.

There is yet another way this tariff might help the Mideast.  When the US raised tariffs against Japan for “microchip dumping” in the 1990s, chip manufacturing quickly migrated to Singapore, China, Mexico, El Salvador and other parts of Asia and Central America.  Would tariffs against Chinese photovoltaic panels shift manufacturing to somewhere in the Mideast?

Image of solar yen from Shutterstock