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How Will the US – China Trade War Affect the Solar Industry?

As everyone knows, the Chinese manufacturing industry is growing fast and China now dominates global manufacturing. The solar panel manufacturing industry is no different. In 2011, China produced half of all of the rest of the world’s solar panels. This means that US manufacturers are losing valuable market share and in fact were responsible for just 3% of world production in the same year.

This Chinese domination led to investigations by the US Department of Commerce in Chinese trading practices. It reached the conclusion that Chinese manufacturers, with the help of state subsidies, were selling panels and components at less than cost – a practice known as “dumping”, thus making it impossible for their US counterparts to compete on a level playing field.

The Department of Commerce responded in May this year by imposing import tariffs on Chinese imports of around 33%. The Chinese argue that this is protectionism, an illegal practice in world trade, whereby a country deliberately makes foreign imports uncompetitive so as to protect its own manufacturers.

Impact on the Solar Industry

The question is, what impact will all of this have on the solar industries right along the supply chain in China and the US? It will be some time next year before the real impact can be seen. The impact may actually be fairly minimal – most of the large Chinese manufacturers have already begun the process of shifting their manufacturing facilities out of China to countries such as Japan and Taiwan, so as to avoid the tariff. This will still increase production costs but not by anything like as much as the tariffs.

If the Department of Commerce does get its wish however, of driving out Chinese imports, this could prove a large backward step for the industry as a whole. China has been a driving force in the advancement of solar technology and in rendering it competitive with fossil fuels. This move will mean that US companies will not need to work to become more competitive and this will hand the advantage back to the fossil fuel industry. The cost of installations will rise and the installers will consequently suffer losses.

This is exactly the wrong time to upset the apple cart and is frankly a baffling decision by the US administration. Cynics might say that the interests of big oil etc are at the heart of the decision.

But I’m in the UK, Why Should I Care?

You might be reading this in the UK and wondering what it has to do with you. Well, apart from the fact that a slowdown in the Chinese solar manufacturing industry will arrest the development of new technology; the EU has plans for a similar tariff.

EU Pro Sun, which represents solar panel manufacturers within the EU, has lobbied for the tariff and an investigation is under way. China now has 80% of the EU market compared to almost 0 in 2004.

If introduced, the tariff may benefit large manufacturers like German giant Sunworld but will hurt those who rely on cheap Chinese imports to maintain competitive prices. The US and EU might not like the idea that China has mastered the manufacturing industry but for the sake of their wider economies they should take a step back and let the market decide which manufacturers to favour.

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