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The US to Halt New Tariffs on Solar Imports for The Next Two Years

On Monday, the US officials announced that it would waive all tariffs on solar imports from four SEA nations. It includes Cambodia, Thailand, Malaysia, and Vietnam.

It is worth noting that China was not included in the list. It indicates that China could soon lose its status as the globe’s manufacturing hub as its imports remain under investigation. The move is also seen as a part of a “global trade structuring” that may drop Chinese exports by the next decade.

Nonetheless, the move came as part of US President Joe Biden’s push to get stalled solar projects back on track after a recent trade probe imposed on the region. The announcements would be a win for solar installers importing panels from Asian countries; however, a blow to domestic panel manufacturers.

The Probe Against China

The decision came as the US Commerce Department’s decision to investigate if Chinese solar makers are illegally avoiding solar tariffs by routing operations via the four SEA countries.

If the investigation concludes that China was circumventing tariffs, it could lead to retroactive levies imposed on imports from those countries. And it could lead to a scenario that would build a chilling effect on new solar developments, says various businesses and lawmakers.

According to companies, including Xcel Energy Inc, and NextEra Energy Inc, the solar-panel probe can cause a significant delay in solar projects. Gavin Newsom, California Gov, told the Commerce Department that it would delay multiple new solar panel and battery storage projects expected to realize by 2024.

A senior administration official said that the White House is attempting to provide greater assurance to developers and utilities who have complained that its trade policies are causing a halt in adding new solar capacity nationally by announcing a two-year pause in any new tariffs.

The Commerce Department probe would proceed simultaneously, added the official.

China’s Loss, Others’ Gain

After four decades of steady expansion, China is facing a population decline that will exacerbate the country’s manufacturing woes.

According to the recent data, China’s population is expected to grow by only 480,000 people this year, a new low. Shanghai Academy predicts a 1.73% annual population drop for working-age people over the next fifty years. By 2100, China’s population would be less than half of its current population.

Manufacturing could push towards labor-rich countries like India, Vietnam, and Bangladesh as China’s labor force shrinks.

Within a decade, India’s population is predicted to surpass China’s. China’s manufacturing expenses are currently twice as high as Vietnam’s. China’s factory activity has shrunk at its fastest rate since the coronavirus outbreak began, owing to continuous lockdowns.

As China’s hold on the solar industry weakens, the US may move more of its imports to new and emerging markets.

Biden’s Dilemma

In addition to the two-year moratorium on new solar tariffs, administration sources said the White House will announce plans to boost domestic solar manufacturing capacity to 22.5 gigawatts by 2024, which is three times the manufacturing capabilities when President Biden took office.

According to the government, this would allow millions of homes to switch to solar energy.

Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association applauded Biden’s planned decision to delay new tariffs. These measures will “protect existing solar jobs,” she added, “leading to increased solar industry employment and nurturing a healthy solar manufacturing base here.”

The tariff issue, on the other hand, has splintered the solar business, dividing solar installers who buy imported panels against American producers who want protection against what they perceive to be low-cost Chinese competition.

Biden has been torn between contradictory interests: on the one hand, he wants to stimulate American industry, while on the other, he wants to speed up the transition to clean renewable energy.

In the face of increasing inflation and the need to challenge China, Biden must also determine what to do with tariffs on tens of billions of dollars in Chinese imports that he inherited from the Trump administration.

Many businesses, economists, and even some government members, such as Treasury Secretary Janet Yellen, have urged Trump to lift some tariffs to reduce inflationary pressures. Inflation is my “top economic priority,”  Biden himself said.

However, as the crisis in Ukraine increases concerns about autocratic governments, Biden is under increasing pressure to be tough on China’s economic policies.