January 24, 2018 Read More →

U.S. Solar Tariffs Will ‘Fail to Generate Material Benefits and Cause Collateral Damage’

S&P Global Market Intelligence:

Most doubt the duties will be enough to support a big new wave of American cell and panel manufacturing.

“Across the board, Trump’s solar tariffs fail to generate material benefits and cause collateral damage,” Varun Sivaram, a science and technology fellow at the Council on Foreign Relations, tweeted on Jan. 23.

Whatever political fallout Trump may face as a result of potential job losses could be compounded if tariffs trigger a broader trade fight. South Korea, China and Mexico said they would contest Trump’s decision, including with complaints to the World Trade Organization, or WTO.

“The U.S. government took actions in consideration of its domestic political situation, rather than abiding by international regulations,” South Korea Trade Minister Kim Hyun-chong said, according to The Korea Herald.

WTO policy stipulates that safeguards only be used in response to unforeseen events. In December 2017, the U.S. International Trade Commission said the recent surge of imported solar cells and panels was caused by China’s unexpected failure to implement agreed-to market reforms since becoming a WTO member, as well as efforts by Chinese and Taiwanese solar equipment manufacturers to evade previously-imposed tariffs.

The WTO is notoriously slow-moving, however, and its opinion may not mean much to Trump. “There’s equal parts giving the finger to China and giving the finger to the WTO in this decision,” Book said of the solar tariffs. “I don’t think the Trump administration will be too sad about a WTO challenge. That’s the kind of confrontation they rhetorically and politically benefit from.”

Outside of the WTO, China may try to pressure the U.S. in “invisible” ways, Height Securities LLC analyst Katie Bays said in a client note. For example, a plan by China Energy Investment Corp. Ltd. to invest $83.7 billion in shale gas development and chemical manufacturing in West Virginia could be “a powerful bargaining chip to informally pressure Trump to back off on solar tariffs,” Bays said.

“The story is not over, and the next chapter may be even more dramatic,” she added.

More: Solar tariffs, while restrained, offer little upside and create potential risk

Comments are closed.