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Days after taking office, the Trump administration announced tariffs on key U.S. trading partners. While Canada and Mexico negotiated a one-month suspension, it appears tariffs will play an even larger role in U.S. trade policy through 2029. Paula Mints examines the history of U.S. tariffs with a focus on the solar industry. On February 1, the United States announced a 25% tariff on Mexican products and non-oil and gas imports from Canada. Canadian oil and gas were hit with a 10% tariff, and the same was applied to all Chinese imports. Two days later, Mexican President Claudia Sheinbaum said she had negotiated a one-month reprieve on the tariffs. Canadian Prime Minister Justin Trudeau announced a 25% retaliatory tariff on US imports, including agricultural products, clothing, machinery, lumber, paper, and beauty products; the levies will be introduced over three weeks. A tariff on imported US energy was considered before a one-month suspension of US tariffs on Canada was also announced on February 3. President Trump is introducing tariffs under the U.S. Tariff Act of 1930 and the International Emergency Economic Powers Act of 1977 (IEEPA), the latter signed by President Jimmy Carter in 1977 during the Iran hostage crisis, which allows the president to impose tariffs during a national emergency. During his first week in office, Trump directed his proposed Cabinet—before any of his appointments were confirmed—to conduct a comprehensive review of U.S. trade policy by April 1, 2025, including trade agreements, global taxation, and international exchange rates. The United States has a history of using tariffs in its trade strategy. Import tariffs were used to fund the government until 1862. During the election campaign, Trump proposed eliminating federal taxes and instead funding the government with tariff revenues, which would be collected by a new Department of Revenue. History lesson The 2012, 2014, and 2022 tariffs on solar energy imports were based on the 1930 U.S. Tariff Act. That law, known as Smoot-Hawley, is considered the most protectionist in the history of U.S. protectionist laws. The law established the highest tariffs in the last 100 years, ranging from 50% to 100% for some 900 products. It also ignited a global trade war. President John F. Kennedy signed the Trade Expansion Act of 1962 to give the U.S. presidency greater negotiating power with partner countries. The Trade Expansion Act granted the U.S. president unprecedented power to negotiate tariffs of up to 80%. The law may have been intended as a negotiating tool, but it is often used as a cudgel. The Section 201 tariffs introduced in 2018, on solar cells and modules, among other imports, were based on the 1974 Trade Act. In theory, that legislation was designed to expand US manufacturers participation in global markets and reduce trade barriers. It also, and crucially, granted the US president broad fast-track authority. Under it, the US president can provide temporary relief to an industry. Section 201 of the 1974 Trade Act theoretically sets a very high bar for applicants seeking tariffs. Unfortunately, theory and practice often do not intersect, and once the door is opened to interpretation based on bias and personal agendas, it is difficult to close. Trump declared a national energy emergency on January 20, making the IEEPA, which allows the president to seize property, among other actions, important to watch, as the administration is clearly testing its powers under the law. Tariffs and solar energy Tariffs are useful as tools to protect domestic industries, but not as useful as instruments of economic torture. As for the solar industry, manufacturing is dominated by China-based producers willing to operate on thin margins. Without some form of protection to level the playing field in terms of the prices they can offer, there simply isnt a game. The Biden administration, while leaving Trumps previous tariffs in place, used them as a tool to address dumping of solar products, circumvention of international trade rules, and to respond to or offset the very low prices of Chinese-made products. At the start of the Biden administration, there was very little domestic solar manufacturing to protect. Thanks to the Inflation Reduction Act (IRA) , the United States began 2025 with nearly 50 GW of annual PV module assembly capacity and will have 15.5 GW of cell capacity once Hanwha Qcells plans are realized. It is doubtful that the United States could have successfully brought on-line significant new capacity with tariffs alone. When the Obama administration imposed tariffs in 2012 and 2014, US solar manufacturing did not expand. Production grew during the Biden administration because of the IRA and, potentially, because the administration maintained tariffs and added new ones. This observation is not an argument for or against tariffs; it is an observation that as long as the solar energy value chain remains unbalanced, the strategic use of tariffs could be justified. Using tariff policy as a weapon never works and carries the risk of trade wars. The prices of consumables and raw materials will rise, resulting in higher prices for finished products. About the author: Paula Mints is the founder and chief analyst of SPV Market Research, a solar energy firm. She previously worked for Strategies Unlimited and Navigant, where she was the director of energy until founding SPV Market Research in 2012. Her expertise includes global solar markets and applications; cost and pricing analysis of photovoltaic cells and modules; system and component analysis, including inverters, trackers, and other balance-of-system equipment; and trend analysis. |
