Ten years ago, the United States sought to bolster its production of solar panels by imposing harsh tariffs on those imported from China. That plan failed, and the Biden administration’s misguided actions now threaten the entire domestic solar industry.
While the Biden administration has been vocal in supporting clean energy, its actions to curb the dire supply chain shortage threatening the solar industry have completely missed the mark. Earlier this year, the administration temporarily lifted tariffs on solar imports from Southeast Asia, but excluded China — by far the world’s largest solar panel producer — from the exemption, severely limiting the efficacy of the waiver.
In response to President Biden’s tariff moratorium on certain Southeast Asian countries, the Commerce Department recently proposed a ruling that would effectively enable the United States to look the other way if Chinese solar manufacturers attempted to circumvent tariffs through third-party countries. Although it may help ease the shortage, it would also render any reasoning behind retaining Chinese tariffs meaningless. If we are going to intentionally overlook Chinese manufacturers that attempt to evade tariffs anyway, we may as well remove the tariffs altogether, thereby cutting costs and improving efficiency. Keeping the tariffs on Chinese solar panels is bad economics and bad politics.
The US once led the world in the production of solar panels, specifically in the manufacture of the photovoltaic cells that actually produce electricity from sunlight. However, by 2012 when tariffs were first introduced, that share had fallen below 5%, and China had for three years been the world’s leading producer of solar panels.
China’s ascent to the head of the industry coincided with a sharp rise in global solar-panel shipments. Worldwide solar-panel production eclipsed 10 gigawatts of power generation in 2010, the same year that China asserted itself definitively as the industry’s global leader.
A healthy response to China’s new role as the world’s solar-panel king would have been for the US to recognize in it an opportunity to turn our attention to the next generation of solar power. Solar power is notoriously fickle, especially in the evening. We could have pivoted our focus towards questions of energy storage and transmission. Instead, we chose to choke off our supply of solar panels in the hopes of reviving a long-flagging domestic sector. Predictably, those efforts failed.
The punitive tariffs imposed by Washington failed to acknowledge a fundamental reality: domestic production of solar panels has been plummeting for decades, and not because of international competition. The US used to lead the world in solar panel manufacturing, but lost that lead as the sector saw rapid international growth. As the rest of the world acknowledged the benefits of solar power, other countries found ways to meet the growing demand for solar panels far more successfully than the US.
China’s dynamic manufacturing sector helped it step up production. So did its reserves of polysilicon, an especially pure form of silicon valuable in electronics manufacturing and essential to the production of solar panels. It took advantage of those factors to assert itself in a growing international market. By the time it stood accused of dumping inexpensive solar panels in the US, it did so not as a claimant to the throne, but as the world’s leader in solar production. The tariffs continue to limit the availability of cost-effective solar panels in the US, and have needlessly kneecapped the entire solar industry.
The best time to plant a tree, so they say, is ten years ago. The next-best time is now. We have seen an entire industry stymied and stifled by poorly considered tariffs. The time has come to set protectionist measures aside, and to rely on our economy’s native genius for innovation.
Aadi Golchha is an economic commentator and writer, proudly advocating for the principles of free enterprise. He is also the host of The Economics Review podcast. The views expressed are the author's own.