Manufacturers and installers shift the burden of tariffs onto consumers. A $1 tariff leads to a $1.35 increase in the final prices.
Tariffs protect domestic manufacturing jobs but reduce overall employment in the industry.
Tariffs have had a net negative impact on the U.S. solar industry and environment by slowing deployment.
A tariff or duty is a tax imposed on imported goods (U.S. International Trade Administration (U.S. ITA)). Trade policies such as antidumping and countervailing (AD/CV) duties aim to protect domestic industries from unfair foreign trade practices, such as selling products at below normal value (dumping) and foreign government subsides (countervailing) (U.S. Custom and Border Protection 2024). In the solar industry, the U.S. imposed AD/CV duties on Chinese solar cells and panels in 2012 (U.S. ITA 2012). In 2014, tariffs were expanded to solar panels assembled using Chinese or Taiwanese cells regardless of country of origin (U.S. ITA 2014, 2015). In 2018, a 30% tariff was imposed on all major solar product exporters to the U.S. (U.S. President 2018; U.S. Trade Representative 2019). This tariff declined 5% each year to reach 15% by 2021. In 2022, the solar tariffs were extended, decreasing 0.25% annually to reach 14% by 2026 (U.S. President 2022). The tariff excluded solar products from Canada and Mexico. Tariffs on Chinese solar cells increased from 25% to 50% in 2024 (The White House 2024).
Research indicates that tariffs increase prices for U.S. consumers, with manufacturers and installers passing the burden of trade tariffs onto consumers (Amiti et al. 2019, Amiti et al. 2020, Houde & Wang 2022). When a $1 tariff is imposed on manufacturers, the final prices of installed photovoltaic (PV) systems increase by $1.35 (Houde & Wang 2022). Similarly, analysis of the 2018 U.S. tariff on washing machines indicate the cost of tariffs is passed to consumers at a rate above 100% (Flaaen et al. 2020).
A study of 2018 import tariffs across various goods (steel, aluminum, solar products, and washing machines) found that by December 2018, they had cost U.S. consumers and importing firms $3.2 billion per month in added taxes and $1.4 billion per month in lost economic value (Amiti et al. 2019).
A study on U.S. solar tariffs found that they reduced overall employment and wages in the U.S. solar industry, as the loss of solar installation jobs outweighed the creation of solar manufacturing jobs (Bollinger et al. 2024). Tariffs increased domestic manufacturing jobs but led to five times the reduction in overall employment. Installation jobs have lower wages than manufacturing jobs, but their economic impact was four times greater than the increase in manufacturing wages, even when considering the difference in pay.
A study of duties on solar and wind components between 2011 and 2019 found no evidence of increased manufacturing jobs in these sectors, but jobs in installation, operation, and maintenance grew (Sharma et al. 2022). These were driven by policy incentives and declining technology costs.
As of December 2023, the U.S. solar industry employed 279,447 workers (Interstate Renewable Energy Council (IREC) 2024, Figure 1). Installation and project development accounted for 64% of all solar jobs (178,812 jobs), a 6% growth from 2022 and manufacturing accounted for 12% (33,273 jobs), remaining flat from 2022. While manufacturing jobs depend on domestic panel production, installation jobs rely on both domestic and foreign panel supply (Bollinger et al. 2024).
Tariffs provided modest benefits to domestic manufactures (Bollinger et al. 2024, Houde & Wang 2022). After tariffs were imposed in early 2018, domestic solar panel assembly doubled within two years due to manufacturers importing cells tariff-free, but domestic cell production failed to increase (Bollinger et al. 2024).
Research indicates that the absence of tariffs, solar PV demand would have been 17.2% higher (Houde & Wang 2022). From 2012 to 2018, without tariffs, manufactures would have lost $4.6 million in revenue, while installers would have gained $291.8 million (Houde & Wang 2022). Consumers would have saved $369.6 million in solar cost.
In the absence of tariffs, the environmental benefits of avoiding CO2 emissions through the adoption of PV systems would have been $1.2 billion over 25 years (Houde & Wang 2022). This amount was calculated using data on projected reduction in solar power generation due to tariffs, CO2 emissions that would have been avoided with additional solar energy, and the social cost of carbon (SSC). The SSC represents the economic value of reducing one ton of CO2, estimated at $36/ton.
Figure 1. U.S. Solar employment growth by sector. Solar employment growth from 2011 to 2023. Dotted line marks tariffs introduced in 2012, late 2014, new tariffs in early 2018 and tariffs extended in 2022. Data/Figure from IREC (2024), U.S. ITA (2012, 2014, 2015), U.S. President (2018, 2022).
References
Amiti M, Redding SJ, Weinstein DE (2019) The Impact of the 2018 Tariffs on Prices and Welfare. Journal of Economic Perspectives, 33(4): 187–210. https://doi.org/10.1257/jep.33.4.187.
Amiti M, Redding SJ, Weinstein DE (2020) Who’s Paying for the US Tariffs? A Longer-Term Perspective. AEA Papers and Proceedings 110 (May): 541–46. https://doi.org/10.1257/pandp.20201018.
Bollinger B, Gerarden T, Gillingham K, Vollmer D, Xu, DY (2024) Strategic Avoidance and the Welfare Impacts of Solar Panel Tariffs. [Working Paper]. https://cowles.yale.edu/sites/default/files/2024-05/Gerarden-solar-tariffs.pdf
Flaaen A, Hortaçsu, A, Tintelnot F (2020) The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines. American Economic Review, 110 (7): 2103–2127. https://www.aeaweb.org/articles?id=10.1257/aer.20190611
Houde S, Wang W (2022) The incidence of the US–China solar trade war. Economics Working Paper Series, 22. https://doi.org/10.3929/ethz-b-000543961.
International Energy Agency (2022) Renewable Energy Market Update: Outlook for 2022 and 2023, OECD Publishing, Paris. https://doi.org/10.1787/faf30e5a-en.
Interstate Renewable Energy Council (2024) National Solar Jobs Census 2023. https://www.irecusa.org/programs/solar-jobs-census/.
Pless J, Van Benthem AA (2019) Pass-through as a test for market power: An application to solar subsidies. American Economic Journal: Applied Economics, 11(4), 367–401. https://www.aeaweb.org/articles?id=10.1257/app.20170611
Sharma A, Surana K, George M (2022) Do clean energy trade duties generate employment benefits? Renewable and Sustainable Energy Reviews, 159: 112104. https://doi.org/10.1016/j.rser.2022.112104.
The White House (2024) FACT SHEET: President Biden Takes Action to Protect American Workers and Businesses from China’s Unfair Trade Practices. Link
U.S. Customs and Border Control (2024). Antidumping and Countervailing Duties (AD/CVD) Frequently Asked Questions. Link
U.S. International Trade Administration (2012) Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the People's Republic of China: Amended Final Determination of Sales at Less Than Fair Value, and Antidumping Duty Order. Federal Register 77(236): 73017-73018. 2012-29669.pdf.
U.S. International Trade Administration (2014) Certain Crystalline Silicon Photovoltaic Products From the People’s Republic of China: Final Determination of Sales at Less Than Fair Value. Federal Register 79(246): 76970-76975. 2014-30092.pdf.
U.S. International Trade Administration (2015) Certain Crystalline Silicon Photovoltaic Products From the People’s Republic of China: Antidumping Duty Order; and Amended Final Affirmative Countervailing Duty Determination and Countervailing Duty Order. Federal Register 80(32): 8592-8596. 2015-03183.pdf
U.S. Trade Representative (2019) Section 201 Cases: Imported Large Residential Washing Machines and Imported Solar Cells and Modules. https://ustr.gov/sites/default/files/files/Press/fs/201%20FactSheet.pdf
U.S. President (2018) Proclamation. To Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled into Other Products) and for Other Purposes. Proclamation 9693 of January 23, 2018. Federal Register 83(17): 3541-3551. 2018-01592.pdf
U.S. President (2022) Proclamation. To Continue Facilitating Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled into Other Products). Proclamation 10339 of February 4, 2022. Federal Register 87(27): 7357. 2022-02906.pdf
