The threat of new US solar tariffs is back

Republicans in Congress, joined by a number of Democrats, are trying to reverse President Biden’s two-year pause of new tariffs on some solar panels manufactured in Asia. The effort appeals to China trade hawks, but it could stop large solar projects in their tracks and doom the United States’ decarbonization goals.

The lawmakers are invoking the Congressional Review Act (CRA), which gives Congress 60 legislative days to review and potentially undo major regulations enacted by federal agencies. Passage of a CRA resolution to reverse a regulation requires a simple majority in both chambers and a signature from the president.

Members of both chambers have introduced a CRA resolution that would undo Biden’s two-year waiver of new tariffs on solar products from manufacturers in Cambodia, Malaysia, Thailand and Vietnam. If the House and Senate both pass the resolution — which is looking increasingly possible, observers say — it will go to Biden’s desk, where he would be expected to veto it. Unless both chambers could then muster a two-thirds supermajority to override Biden’s veto, the failed resolution would do little more than provide fodder for campaign ads for Republicans and a few Democrats in vulnerable districts.

The Auxin Solar saga

This whole kerfuffle began early last year when Auxin Solar, a tiny California-based maker of solar panels, convinced the U.S. Department of Commerce to investigate whether new tariffs should be imposed on panel manufacturers in four Southeast Asian nations for allegedly circumventing existing tariffs on Chinese solar companies. Auxin argued that the Southeast Asian manufacturers appeared to be performing only a modicum of additional work on panels that were largely manufactured in China, and the Commerce Department decided to look into the matter.

The mere threat of potential new tariffs, which could have been made retroactive, stopped utility-scale solar project development in the U.S. cold and led to many projects being put on hold because developers couldn’t get their hands on enough solar panels. The panicked industry characterized the tariff threat as an ​“existential crisis.”

In June 2022, Biden gave the industry a reprieve by declaring that no new tariffs would be imposed for 24 months. But the Commerce Department has continued its investigation, and in December, it released a preliminary finding that some Southeast Asian manufacturers had indeed been circumventing tariffs on Chinese goods. If that finding is finalized, new tariffs will be imposed in June 2024 (but not retroactively).

China currently dominates the manufacturing of solar panels. The Inflation Reduction Act, passed last August, has the potential to jump-start American solar manufacturing, but there still won’t be enough factory capacity up and running by June 2024 to ensure that domestic demand for solar modules is met. So if new tariffs are put in place, panel shortages could once again debilitate U.S. utility-scale solar.

And if a CRA resolution rolls back Biden’s two-year tariff pause, then those debilitating shortages could begin this year instead of next.

Bipartisan support for undoing Biden’s tariff pause 

The CRA resolution has bipartisan support, including from politicians in states and districts that are home to solar manufacturing or those looking to develop solar manufacturing.

Many Republicans appear to be on board. Some started voicing opposition to Biden’s tariff pause last year with a letter signed by 20 members of the House, including now–Speaker Kevin McCarthy (R-Calif.) and now–Majority Leader Steve Scalise (R-La.).

Democrats are divided on the issue. Sens. Sherrod Brown (D-Ohio) and Bob Casey (D-Pa.) are vocal members of the pro-resolution camp. They wrote a letter to Biden in March opposing his decision to pause the tariffs. ​“It’s clear our policy toward China has served American corporations and the Chinese government but not American workers,” Brown told E&E News. ​“I want these [solar] plants built in Ohio.” His state is already home to the biggest vertically integrated solar-manufacturing facility in the U.S., and more solar factories are planned for Ohio.

Meanwhile, Sen. Jacky Rosen (D-Nev.) is leading opposition to a Senate CRA resolution, and a number of other Democrats have joined with her, wanting to ensure that deployment of solar power is not slowed down. But other Democrats have yet to make up their minds.

Supporters of the CRA resolution are hoping to push it through this spring.

Utility-scale solar industry on red alert

“We are spending a significant amount of time with members of Congress explaining why this is unnecessary, unproductive and hurts our economy,” said Abigail Ross Hopper, CEO of the Solar Energy Industries Association, in an interview with Canary.

“We’re missing the reality of the situation” when the resolution is framed as fighting back against China, said Hopper.

The reality is that today’s fast-expanding utility-scale solar industry in the U.S. is dependent on inexpensive imported solar panels — at least until the country develops its own domestic manufacturing sources. Substantial incentives in the IRA for solar manufacturing will help, but building factories takes time, and the U.S. would need a whole lot of factories to supplant imports from Asia. In 2021, about 80 percent of solar panels in the U.S. were imported, and of those imports, about 80 percent came from Cambodia, Malaysia, Thailand and Vietnam.

“We are all in agreement that there needs to be reshoring and reinvestment here of American solar manufacturing,” Hopper said. ​“But we can’t just snap our fingers or pass a piece of legislation and have a manufacturing base happen overnight. We’re going to need a bit of time for the domestic manufacturers to invest and build their factories and allow the solar industry to continue to provide carbon-free electricity and jobs and investment in local communities,” said Hopper. Keeping new tariffs on pause is ​“really the right choice,” she argued.

Read Canary’s past coverage of the Auxin Solar trade case.