Why new tariffs on solar cells could make domestic panels more costly

Much of the recent news about tariffs revolves around President-elect Donald Trump’s plans to hike across-the-board duties on products imported from China, Canada, Mexico and other countries.

But Joe Biden is still the president, and his administration is imposing tariffs of its own aimed at boosting solar manufacturing in the United States.

On Friday, the Biden administration announced new tariffs on solar cell manufacturers in four Southeast Asian countries — Malaysia, Cambodia, Vietnam and Thailand. That’s where many Chinese solar manufacturers moved operations after they were targeted by earlier rounds of U.S. tariffs.

The move has implications for both solar manufacturers and solar installers in the U.S.

There is a tension at the heart of the federal government’s policies around solar energy these days.

Noah Kaufman at the Center on Global Energy Policy at Columbia University said on the one hand, “we want cheap solar because it will lead to faster deployment of solar, so we’ll deploy clean energy faster.”

On the other hand, U.S. leaders would like those solar panels and cells to be made in America. 

But for years, it’s been cheaper to import them, which is why the U.S. has repeatedly tried to raise import costs on Chinese solar, only to see manufacturing move elsewhere in Southeast Asia.

“Trade tends to be a game of whack-a-mole,” said Mike Carr, head of the Solar Energy Manufacturers for America Coalition. He said these latest tariffs could lead foreign solar companies to just relocate again. 

But thanks to tax credits and other financial incentives from the Inflation Reduction Act, he said the domestic solar manufacturing industry is starting to get off the ground. 

“We are talking about for the first time, really in the history of solar, globally scaled factories being built here in the United States,” Carr said.

But a lot of those factories are building solar panels that are made up of cells, which are mostly imported, said Elissa Pierce, a solar supply chain analyst at Wood Mackenzie.

“Because the tariff is on the solar cell, U.S. module manufacturers who are importing cells from those four countries will also face increased costs,” Pierce said.

Those costs will likely get passed along, making solar installation more expensive, said Steve Cicala, an associate professor at Tufts University.

“And the more expensive it is to do that, the fewer people are going to do it,” Cicala said.

And if we really want to tackle climate change, he argued, we should be deploying the most cost-effective solar, even if it’s imported.