Fox File #45 "Section 201 Pt. 2"
The Fox Files is a weekly message from EDCUtah President & CEO Theresa Foxley.
I wrote a Fox File back in November on a trend we noticed in our pipeline related to solar PV manufacturing. https://edcutah.org/news/2017/11/13/fox-file-32-section-201 At the time, we had 5 Solar PV projects inquiring about manufacturing in Utah. We deduced that the uptick in project activity was a result of the pending trade dispute brought before the ITC, wherein U.S. solar manufacturers alleged that low-cost imports were damaging their business. Those manufacturers sought redress for this damage through the imposition of a tariff.
We promised you that we would provide an update on the case and our pipeline as new details emerged.
Late last month, President Trump approved duties of as much as 30% on solar equipment made outside the U.S. We thought we might see new activity around these projects after the tariff decision, but the decision does not appear to have resulted in the U.S. manufacturing we expected. Of the projects we had in our pipeline, only one appears to be actively looking for a U.S. manufacturing facility today.
EDCUtah Business Development Manager Jake Berlin, who is managing these projects had the following to say on the matter:
"Our speculation is that many foreign manufacturers feel that it’s still more economically viable to manufacture overseas and import into the U.S. even with the tariff in place. In addition, there’s uncertainty around the long-term tariff situation for most companies to justify a major investment to establish a U.S. manufacturing presence. Here are a couple of reasons why this may be the case:
- The tariff rate starts at 30% which is lower than the 35% rate recommended by the International Trade Commission (ITC). This lower rate surprised some within the industry and may not be high enough to deter companies from continuing to manufacture offshore.
- In addition, the rate drops gradually over a period of four years to 15%. By year four, the additional labor costs to manufacture in the U.S. are very likely to outweigh any cost-savings that would come from avoiding the tariff.
- The first 2.5 gigawatts of imported solar cells will be exempt from the tariff, so smaller manufacturers will still be able to import a large portion of their cells tariff-free anyway.
- Within four years, a new administration with a greater interest in promoting the growth of the renewable energy industry could lower or remove the tariff.
- A trade dispute case is likely to be filed with the World Trade Organization (WTO). The WTO has a robust history of resolving trade disputes between countries and there’s a possibility it could rule that the solar panel tariff violates WTO rules. This process would typically take about 15-18 months once the case is filed.
Ultimately, it appears that the tariff may drive up the costs for solar panel developers and installers, but it won’t be enough to incentivize companies to shift production to the U.S.”
We’ll continue to monitor the situation and keep you posted on it. In the meantime, Jake is working closely with our partners at the Governor’s Office of Economic Development to demonstrate Utah’s value proposition to the solar panel manufacturer we are actively courting.