Biden’s China Tariffs Leave Space For Key Solar Machinery

(Bloomberg) -- US President Joe Biden’s plan to hike tariffs on Beijing’s green technology leaves room for companies to avoid duties on solar manufacturing equipment — an exemption that speaks to US reliance on Chinese-made machines to swiftly build out factories, potentially benefitting a small group of niche producers.

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While so-called 301 tariffs on solar cells and modules from China will double, from 25% to 50%, the administration is also looking to exclude some machinery altogether in response to pleas from some US manufacturers. They argued tariffs on solar ingot and wafer-making equipment undermined Biden’s goal of establishing a broad domestic supply chain.

Under the plans announced Tuesday, US Trade Representative Katherine Tai acknowledged this, beginning a process that would include 19 possible exclusions for gear used to make solar components. The approach — like one used after former President Donald Trump first imposed the 301 tariffs — gives companies and industries a chance to petition the government to win exemptions. That process is likely to play out over months.

“You cannot just flip a switch to have the resilience that you need to build towards,” Tai said on Bloomberg Television. “That exclusions process is very much a recognition of the need to send a strong signal and to provide our producers with the ability to transition to manufacturing more here at home.”

She added that there would be further announcements regarding separate exclusions set to expire at the end of this month.

The carve-out in a headline-grabbing list of measures — and in the throes of a presidential election campaign — underscores how years of dominating solar manufacturing has solidified China’s role in the supply chain. Not only is it home to factories that produce more than 80% of global panels, but its companies also produce the most advanced equipment to outfit those plants.

Companies including Wuxi Autowell Technology Co., Suzhou Maxwell Technologies Co. and Shenzhen SC New Energy Technology Corp. build machines such as crucibles needed to form polysilicon ingots, diamond wire saws that slice them into ultra-thin wafers and laminators that bind modules together.

That kind of equipment accounts for at least 55% of the capital expenses of building a new solar factory, according to BloombergNEF. Slapping 25% Section 301 tariffs on such goods coming from China would have made the equipment 50% to 100% more expensive once logistics and transport costs are added in, BNEF estimates.

“We’re glad to see the Biden administration take a step to strategically re-align 301 tariffs to help onshore US solar manufacturing and support solar manufacturing workers,” said Mike Carr, executive director of Solar Energy Manufacturers for America. “As America works to build out manufacturing in key clean energy supply chains to reduce the country’s reliance on China’s supply chains, we need to use every tool at our disposal to boost the US solar manufacturing industry.”

Read More: China Vows ‘Resolute Measures’ After Biden’s New Tariffs

Canadian Solar Inc. rose 7.5% in New York on Tuesday, the most in a month. First Solar Inc. fell 1.4%.

The administration’s plan also differentiates between lithium-ion batteries used in electric vehicles — slated for tariff hikes — and those used in solar and wind power projects, where existing tariff levels are set to be maintained. Solar power developers had argued that distinction was necessary to ensure swift development of emission-free power in the US, while domestic battery manufacturing ramps up.

“Today’s decision recognizes the value of battery energy storage and its importance to the reliability of our electric grid,” said Jason Grumet, chief executive officer of the American Clean Power Association. “As energy demand grows, battery energy storage is lowering costs for American families and businesses.”

Chinese solar manufacturers have been looking to shift some of their manufacturing capacity overseas, in part to get around growing trade barriers. Firms such as Trina Solar Co. and Longi Green Energy Technology Co. and Jinko Solar Co. are all building or have recently opened plants in the US.

China has hinted it understands the need to let its companies bring their technology abroad. In January 2023, the Ministry of Commerce and Ministry of Science and Technology sought out public comment on adding some advanced solar manufacturing methods to its list of technologies it prohibits exporting — but when that list was finally published in December, solar technology wasn’t included.

“Tariffs on Chinese equipment may just further slow down investment plans that are already under pressure from economics and other challenges,”said Yali Jiang, an analyst with BloombergNEF. “The availability both in terms of scale and economics from Chinese equipment suppliers could help the US on its local supply chain ambitions.”

--With assistance from Mark Chediak, Kailey Leinz, Joe Mathieu and Luz Ding.

(Updates with details, comment from Tai in paragraph 4)

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