Trump tariff is too little, too late

Last week, President TrumpDonald John TrumpTrump renews attacks against Tester over VA nominee on eve of Montana rally Trump submits 2017 federal income tax returns Corker: Trump administration 'clamped down' on Saudi intel, canceled briefing MORE announced a four-year, 30 percent tariff on solar panel imports in an effort to revive the struggling U.S. solar manufacturing industry and reduce our dependence on foreign imports—but it’s too little, too late.

The Chinese market has already taken off, producing 60 percent of the world’s solar cells and 71 percent of solar modules. That success resulted from low-interest government loans, preferential access to land, minimal environmental regulations, and generous solar subsidies. Meanwhile, in the United States, the four-year tariff will be unable to stimulate U.S. manufacturing enough to compete with China’s entrenched economy of scale without some other incentives.

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Therefore, investing in new solar technology, rather than tariffs, is the best bet for the United States to remain competitive. However, Trump has delegitimized climate change as a national security threat and prioritized a coal renaissance, leaving little room to promote solar in a way that would substantially improve our manufacturing capabilities.

Today, there are 14 solar manufacturers in the United States, but they can only meet 20 percent of the 2018 solar demand. While some are or were already expressing plans to increase capacity, it takes two years to build a cell manufacturing plant. The short duration of the tariff isn’t enough time for that to make economic sense. South Korea also says that the tariff violates the World Trade Organization rules—so the tariff may not even last the whole four years.

South Korea is not the only country irked by the decision. While only 10 percent of U.S. solar imports come directly from China, many come from Chinese run companies in Korea and Southeast Asia. China’s commerce minister called the move “an abuse of trade remedy measures” and expressed “strong dissatisfaction.” China will find new markets if the United States is unattractive, and Trump is pointlessly treading on a trade war with partners who have just as much firepower.

The idea that the tariff will increase jobs is also misplaced. The tariff is expected to increase the cost of solar modules by about 10 cents per watt and increase installation costs up to 9 percent. As a result, the Solar Energy Industries Association (SEIA) predicts that the market will slow by up to 20 percent, causing a loss of 23,000 jobs out of 260,000 solar jobs across the country.

Since only 2,000 of those jobs are for cell and panel manufacturing, and considering that factories are mainly automated, it would take a lot of factories to make up for the job losses. Plus, several of the manufacturers that would build factories in the United States are foreign owned anyway and would reap the economic benefits back home.

In the end, the market impact will probably not be as severe as the SEIA predicts given the strength of the market, that modules will remain below their 2016 costs, and that tax incentives are in place until 2021. Solar panels and other hardware only make up 36 percent of total installation costs, so there are still opportunities to offset the impact of the tariff by lowering indirect or soft costs. Yet, since the United States can’t rely on cheap labor like our competitors, we need better technology and capital equipment to achieve those efficiencies.

It’s unlikely that the United States would be able to make solar panels or modules cheaper than China, so new technology would put our products and industry ahead of the pack. Sadly, the current administration has proposed major cuts to government research and development (R&D), while unnecessarily increasing defense spending. In 2017, energy investments made up only 2 percent of the non-defense federal R&D budget—and Trump’s budget would cut that already dismal number in half.

Because it will take time to get new technology into the market, programs that accelerate technology transfer are also key. This is yet another area that the GOP has attacked, saying they are a waste of taxpayer money and federally funded R&D centers should focus on fundamental science instead.

In the absence of other incentives for domestic manufacturing, the planned tariff will not create jobs or rejuvenate U.S. solar manufacturing. It will slow the solar market and increase tensions with international trade partners. Instead, the United States should be making major investments in solar technology R&D and programs that support rapid commercialization. This will help us stay competitive and ultimately accelerate a clean energy transition to mitigate the effects of climate change.

Dan Misch is a U.S. Navy veteran and member of Truman National Security Project’s Defense Council. Views expressed are his own.