Solar Tariff Fight May Have Far-Reaching Effects

For decades, American steelmakers have enjoyed a reliable shield against foreign competitors: U.S. trade policy. Now, they say, that protection is under threat from the solar industry.

Solar developers are pushing the Biden administration to scrap a probe into whether Chinese solar-panel makers are evading tariffs. And they’re supporting that stance with a novel argument: The administration should consider how the investigation is undermining the global fight against climate change.

This reasoning strikes fear into American steel. The United States has long set duties to combat unfair trade practices based on a narrow set of criteria centered around competition, subsidies, and pricing. Any new criterion risks making it harder for U.S. industrial businesses to win new duties in future disputes.

Dropping the investigation into Chinese solar businesses’ tariff compliance would tell U.S. manufacturers that “even if you have a valid case and you’re losing jobs” because of unfair competition, you might be denied relief, said Scott Paul, president of the Alliance for American Manufacturing, a group that represents steelmakers and workers. “If you weaken that, you’re going to weaken overall support for more trade.”

As solar-installation advocates pitch a different approach to trade policy, several U.S. senators have made direct appeals to President Joe Biden, encouraging him to factor climate into the inquiry, according to people familiar with the discussions who weren’t authorized to speak publicly.

“You have an administration that said they were going to do a climate test on everything,” said George Hershman, CEO of SOLV Energy, a solar developer pushing to end the probe. “Is that a stretch for appropriateness? Probably not.”

On Monday, Biden attempted a slightly different strategy to resolve the crisis. He invoked the Defense Production Act to support U.S.-made solar and other domestic clean-energy manufacturing and used emergency authorities to impose a two-year freeze on new tariffs for panels. But his moves were quickly rebuked by domestic manufacturers.

“In order to avoid this alleged national emergency, we are going to allow ourselves to become even more dependent on Chinese-owned solar companies in Malaysia, Vietnam, Cambodia, and Thailand,” Tim Brightbill, a trade lawyer at Wiley Rein, said in an email. “This is wrong on multiple levels.”

The trade case—sought by a small California panel manufacturer—is existential for much of U.S. solar. For months, the U.S. Commerce Department has been investigating whether Chinese solar manufacturers are circumventing decade-old duties by assembling equipment in Cambodia, Malaysia, Thailand, and Vietnam, prompting shipments from those countries to fall. The threat of retroactive tariffs has paralyzed parts of the U.S. solar sector, risking installation jobs and slowing the deployment of panels—a critical piece of Biden’s push to slash emissions from the country’s power grids. (Preliminary findings in the case are expected by late August).

The Solar Energy Industries Association is lobbying lawmakers to include language in a domestic manufacturing bill that would force Commerce to determine whether any new duties are in the public interest. Others contend Commerce already has authority under existing law to determine that it’s simply not “appropriate” to expand existing duties, based on climate and economic concerns.

Steel producers and workers, meanwhile, have pressed leaders in Washington to resist the push by the solar developers. Now isn’t the time to radically change trade laws and how they work, they’ve said.

The trade case has caused friction between solar and steel, two industries that frequently collaborate on clean-power projects. “We’re still trying to figure out what the long-range plan of this is,” Leon Topalian, the CEO of steel giant Nucor Corp., said in an interview. “We’re going to be a big supplier in the renewable space.”

At issue are so-called antidumping and countervailing duties, which are intended to level the playing field for domestic manufacturers against imported goods that are subsidized or sold below the cost to produce them. Federal laws and regulations governing this type of duties date back more than a century.

Antidumping and countervailing duties are distinct from other, more subjective tariffs under U.S. law—including those former President Donald Trump wielded on steel and aluminum in the name of national security. (Biden has already chipped away at steel’s robust trade protections introduced by his predecessor.)

“If you stick to the antidumping and subsidy script, there’s a clear set of rules,” said William Reinsch, a trade expert at the Center for Strategic and International Studies. “You have to prove a specific bad thing has happened—either dumping or subsidization—and you have to prove you have been injured because of that, and not some other reason. And only if you prove those two things do you win.”

Adding climate considerations or other public-interest tests would create a slippery slope, he said. Even the Trump administration, known for digging up little-known laws to launch its trade policy, left Commerce’s antidumping and countervailing duty laws largely untouched.

If other elements such as climate impact are also taken into account, “it opens the door to a thousand other requests,” Reinsch said. “There will inevitably be no shortage of other people arguing that their cause is also important.”

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