In the coming weeks, President Biden faces his first real trade test: he must decide whether to extend the tariffs imposed by President Trump on imported solar energy components or let them expire in February. Either way, he owns the decision fully. If Biden decides to end the tariffs, trade in solar products will be freer, which will boost his plans for shifting quickly to solar energy to reduce American dependency on fossil fuels and thus combat climate change. On the other hand, if he decides not to keep them, he could be accused of betraying American manufacturing workers and labor unions.
While the politics of the decision may be tough for the president, the economic, environmental, and legal case against the tariffs is easy, and he should let them expire.
Background
In 2018, President Trump imposed safeguard tariffs and tariff-rate quotas (TRQs) on most crystalline silicon photovoltaic (CSPV) products, including the cells in solar panels, pursuant to under Section 201 of the Trade Act of 1974. Only solar cells (but not modules) are subject to the TRQ, which permits a set annual quantity of goods to be imported tariff free and imposes a tariff on any additional quantities. Safeguard measures are intended to be a temporary restriction on certain imported goods to shield domestic industry from injurious foreign competition. In a 586-page report, however, the United States International Trade Commission (USITC) unanimously recommended that President Biden extend the current TRQs and 18 percent tariffs for four more years, slightly reducing the tariff rate each year.
The Economic Case Against Extending the Tariffs
The Commission determined that the tariffs and TRQs remain necessary to “prevent or remedy serious injury to the U.S. industry” and that the domestic industry is “making a positive adjustment” to import competition. However, the USITC’s conclusion that the domestic industry is thriving as a result of these tariffs is befuddling: Multiple sources have reported that the solar industry lost jobs despite the tariffs. The Solar Energy Industry Association (SEIA) estimates that, although the manufacturers requesting the solar safeguards promised to create 45,000 American jobs, they actually lost 6,000 jobs since the safeguard was implemented, while the industry as a whole (including downstream installers) “missed out on more than 62,000 jobs, $19 billion in private sector investment and more than 10 gigawatts of solar deployment.”
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