It would be hard to imagine that the Trump Administration did not expect to make some ripples across the world when its imported solar panel tariff officially took effect on February 7th. What they probably did not expect is the push back from the international community to be this strong so fast.
The Trump Administration’s tariff on imported solar panels has been in effect for only two weeks yet it has stirred up political and legal protests in several countries across the globe. The most aggressive of which has come from three Canadian companies that filed a lawsuit last week with the United States Court of International Trade.
The Main Points of the New Solar Panel Tariff
In case you have not heard, after a recommendation from the ITC, President Trump put his signature to a new trade policy that would enact a stiff tariff on imported solar panels over the next 4 years. The tariff would be 30% on imported solar panels the first year of the legislation and scale back 5% each year to a 15% tariff on solar panels in its fourth and final year. The tariff only kicks in after the first 2.5 gigawatts of solar panels have been imported to the USA from a foreign country.
The solar panel tariff was one of President Trump’s first acts on what he perceives as unfair trade practices that are hurting American businesses. Trump has long threatened to enact tariffs to correct what he sees as foreign countries benefitting from skewed trade agreements that were signed by previous administrations. The move is intended to stir production and employment among America’s solar panel manufacturers.
Details of the Canadian Solar Panel Lawsuit
What is the basis for the Canadian solar panel group’s legal claim? They state that in the findings of 3 of the 4 ITC commissioners they specifically stated in their tariff recommendation to President Trump that Canadian solar panel imports were not harming American solar panel producers. The 4th commissioner did not mention Canada as a country whose solar imports did or did not hurt American solar panel businesses.
As a result, the three Canadian solar panel producers Silfab Solar, Heliene and Canada Solar Solutions decided to file a lawsuit with the United States Court of International Trade immediately after the tariff went into effect. In their lawsuit they claim that the tariff specifically goes against the Trade Act of 1974 and also violates the terms of the NAFTA agreement that both parties had signed.
They also state that the tariff could inflict grave harm on their solar panel business and could force them to lay off a large percentage of their workforce. They also argued that Canadian solar panel imports to the USA were a very small percentage of the total imports and therefore Canadian suppliers could not possibly impact the United States domestic solar panel manufacturing industry.
So far the three Canadian companies are the only ones to officially file a lawsuit against the Trump administration. That could drastically change if the United States Court of International Trade rules in favor of the three Canadian solar panel producers.
A panel of judges on the United States Court of International Trade will take a close look at the matter and specifically concentrate on whether or not the solar panel import tariff strictly follows USA laws and policies on trade.
Other Countries Seek Consultations from the WTO over the Solar Panel Tariff
While not specifically filing lawsuits, other countries from around the world impacted by the solar panel tariff officially filed protests of the decision by the American government. These included such big trade players as China, South Korea, Taiwan and the European Union appealing to the World Trade Organization on the very first day the tariff went into effect. The WTO will most likely hold consultations between the countries involved in the protest filing and representatives of the Trump Administration.
Failure for the consultations to bring resolution to the solar panel tariff matter will probably result in retaliatory tariffs on USA imports to the countries involved in the dispute.
Interestingly enough, Japan and Mexico, two of the biggest importers of solar panels to the USA have been somewhat silent.
An Interesting Few Months Lie Ahead For the USA and Its Trading Partners
The tariff on solar panels may just be the tip of the iceberg when it comes to international trade. It will be interesting to see over the next few months what the WTO and United States Court of International Trade rule on the matter. Not to mention what will be the fallout if other countries retaliate by imposing tariffs on imported good from the USA. Buckle your seat belts because one thing is for sure and that’s that it will be a bumpy ride on the world trade scene over the next few months.