U.S. Imposes Tariffs on China Solar Panels

Trade tensions between the U.S. and China are likely to ratchet up after the Commerce Department found several Chinese solar-panel companies guilty of dumping and slapped 31% tariffs on their products.

The tariffs will give U.S. panel makers battered by Chinese competition a leg up, but they probably aren’t high enough to drive the Chinese makers out of the business altogether. Critics of the U.S. move said the biggest result may be harm to the overall solar business by raising costs for homeowners or business trying to generate solar power.

Thursday’s action came in response to a complaint by the U.S. unit of German firm SolarWorld AG and a half-dozen other solar-energy companies. The Commerce Department determined that the Chinese manufacturers were selling solar panels at below-market prices.

Those receiving the 31% tariff include Suntech Power Holdings Co. and Trina Solar Ltd. That tariff comes on top of tariffs ranging from about 3% to 5% levied in March over a related complaint that the Chinese companies had received unfair export subsidies. Suntech’s share price fell 5.75% in New York Stock Exchange trading, while Trina fell 7.9%.

The Commerce Department said the decision was preliminary, and the companies will have the chance to challenge the tariffs before they are made final later this year.

On Friday, China’s Ministry of Commerce said the ruling sends “negative signals of trade protectionism,” according to state-run Xinhua news agency.

SolarWorld and others allege that cheap imports helped devastate the U.S. solar manufacturing sector and led to the loss of about 2,000 jobs. While it sought even higher tariffs than those unveiled by the Commerce Department, SolarWorld cheered the ruling.

“It’s a positive step,” said Gordon Brinser, the president of SolarWorld USA. “Illegal subsidization of industries to harm and put other markets out of business is bad for everybody in the long run.” He said Chinese firms are seeking “total dominance” of the sector that could lead to monopoly pricing in the long term.

One of the targeted companies, Suntech Power, lashed out at the duties.

“These duties do not reflect the reality of a highly competitive global solar industry,” said Andrew Beebe, Suntech’s chief commercial officer.

Opponents of the trade suit argue that the proliferation of cheap panels has helped spur strong growth of the solar market, especially in the U.S., which gets about half its solar panels from China. Punitive tariffs could slow that growth and cost consumers money, they say.

Chinese officials said in March they were investigating U.S. support for clean energy. In past trade disputes, China has retaliated by slapping tariffs on other U.S. industries.

“Our intent here was to try to prevent a trade war, and we’re going to keep working on that,” said Jigar Shah, a spokesman for a group that represents Chinese solar-panel makers and U.S. solar-panel installers. Mr. Shah said U.S. solar-panel prices are already high because of the “cloud of chaos” created by the Commerce case.

Jesse Pichel, an analyst at Jefferies Group Inc., predicted that large Chinese panel makers would sidestep the tariff by obtaining solar cells for the U.S. market from Taiwan and other countries.

“The Chinese have really become the leaders of solar technology,” Mr. Pichel said. He said prices were likely to rise in the U.S. and that would be “negative overall for demand and business.”

At the core of the trade dispute is a debate about the best way to accelerate the growth of clean energy. Many economists, inspired by the example of computers and other high-tech gear, argue it is best to let developing countries do the manufacturing at lower cost, while richer countries benefit from the proliferation of affordable goods.

Others say it is important for Washington to support the creation and protection of domestic manufacturing in small-but-growing sectors.

“Predatory trade practices that undermine American industry and workers cannot be tolerated in any industry, but especially in one that holds such great promise for growth and job creation,” said Rep. Ed Markey (D., Mass.).

The solar case is complicated by the prickly trade relationship between the U.S. and China. U.S. officials have argued for years that China’s exports are artificially boosted by cheap currency. This spring, the Obama administration took a dispute with China to the World Trade Organization and announced the creation of a “trade enforcement unit” to make sure that China complies with global-trade rules.

Write to Keith Johnson at keith.johnson@wsj.com and Cassandra Sweet at cassandra.sweet@dowjones.com

A version of this article appeared May 18, 2012, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: U.S. Imposes Tariffs On China Solar Panels.