Proposed U.S. import tariffs on solar panels made by Chinese companies could increase their cost in America by an average of 14 percent, sharply diminishing what Washington calls China's unfair competitive edge, according to a new report by the market research firm by GTM Research.
On June 19, GTM, a subsidiary of Greentech Media, said Chinese manufacturers have many options for responding to the proposed tariffs announced by the U.S. Commerce Department on June 3. But none of them can avoid what Shyam Mehta, a co-author of the report, called an inevitable cost.
"While the strategies vary, one constant remains across all scenarios: pricing for Chinese modules shipped to the US is highly likely to increase starting in July 2014," Mehta said. "Consequently, the primary competitive advantage of Chinese suppliers in the U.S. market – lower pricing by as much as 25 percent historically – could be greatly diminished."
Washington accuses Beijing of generously subsidizing Chinese solar panel manufacturers, then dumping the products in the United States at prices that can't realistically be matched by domestic manufacturers.
China already has been paying U.S. tariffs on its panels since 2012, but it has been able to take advantage of a huge loophole: avoiding the tariff by making the panels in Taiwan. The proposed duties would close that.
The Commerce Department proposal also would raise the duties to between 19 percent and 35 percent, with a final determination due on Aug. 18. Meanwhile, the International Trade Commission is likely to rule on the plan within 45 days since the proposal was announced.
If the tariff becomes final, companies that will become more competitive with Chinese counterparts are U.S. companies that make panels in Southeast Asia, including SunPower Corp. and First Solar, Shaylee Kann, vice president of GTM Research, told Bloomberg News.
Kann said Chinese companies that will become less competitive include Yingli Green Energy Holding Co. (NYSE: YGE ) . The tariff also may hurt Chinese manufacturers of utility-scale solar power generators. "They're going to have the hardest time making the numbers pencil out," he said.
Even if the tariff is approved, Kann said, it's "unlikely" that Chinese companies would cave in and begin manufacturing solar panels in the United States.
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