LAST WEEK THE Commerce Department finalized its plan to slap tariffs on Chinese solar panels. Commerce accuses Chinese manufacturers of accepting illegal subsidies and dumping products below cost on the U.S. market. Following the announcement, President Obama’s allies applauded the administration’s resolve to crack down on trade manipulators.
There’s not much to applaud. Tariffs are blunt tools that the government should deploy sparingly, and this case is a good example of why.
It’s true that Beijing has channeled state resources into solar-panel manufacturing. Chinese firms now claim two-thirds of the world market. Chinese panel manufacturers have driven down global prices to the point that even they have lost hundreds of millions of dollars this year.
But how much should a Chinese-made solar panel cost? The answer isn’t obvious. Commerce’s estimating methods — using Thailand’s economy as a surrogate for China’s — don’t inspire confidence. And U.S. firms that export polysilicon, a key material in the panels’ manufacture, or machinery to Chinese solar-panel makers could lose — if not because of the direct influence of the tariffs themselves, then because of the Chinese government’s likely reaction. Analysts worry that the Chinese will retaliate by slapping duties on U.S. polysilicon. Also at risk is the U.S. solar installation business, which has thrived during this period of low-cost panels.