Trump’s Solar Tariffs Could Backfire in Red States

The decision to impose stiff tariffs on imported solar panels may prove particularly damaging to workers in Republican strongholds.

AP Photo/Rich Pedroncelli
Brian Dabbs
Add to Briefcase
Brian Dabbs
Jan. 23, 2018, 2:49 p.m.

A White House decision to slap steep tariffs on foreign solar cells and modules could threaten employment in Republican states—and line the pockets of a top Democratic donor.

Following months of anxiety in the U.S. solar industry, President Trump levied a 30 percent tariff on foreign solar cells and modules Monday.

That choice could burnish the trade credentials of a president who often maligns U.S. policy for flooding the domestic market with foreign goods and displacing domestic jobs. Anti-trade rhetoric has been a cornerstone of the Trump political persona since he launched his candidacy in 2015.

The Trump administration is touting the move as a way to boost U.S. manufacturing and confront Chinese trade practices headlong.

But the solar and energy industries staunchly oppose the tariffs, pitting them against the companies driving the tariff change—two domestic solar-panel producers that represent the last vestige of their industry. One of those producers is a subsidiary of SolarWorld Ag, an insolvent German company. SolarWorld Ag’s creditors include Centerbridge Partners—a private investment firm co-founded by Mark Gallogly, who has dumped large sums into Democratic campaign coffers.

Roughly 85 percent of jobs in the $28 billion U.S. solar industry involve installation, sales and other non-manufacturing employment. Before the tariffs, Republican states were projected to install utility-scale solar at much higher rates than blue-state counterparts, a trend that brings with it tens of thousands of jobs.

“There is definitely a growing job market in those red states for solar, and they will definitely be hit by this tariff,” said Ellen Shenette, a manager at the Environmental Defense Fund. Shenette’s group recently released a report that outlined an unexpected decrease in installation rates in 2017 due, in large part, to tax reform and the specter of tariffs.

Employers will likely cut an estimated 23,000 American jobs because of the tariff decision, according to the Solar Energy Industries Association, which says the industry employs more than 11 times that figure.

Those Republican states, including some where Trump won in a landslide, could be hit hardest, according to SEIA data. South Carolina was slated to boost installation by 1,726 megawatts over the next five years, according to the group. The state has 265 megawatts installed. That’s a nearly sevenfold increase, a rate that far outpaces any Democratic state.

Texas was scheduled to triple its installation to more than 7,000 megawatts. Florida was predicted to experience a bump of more than sixfold, bringing its total installation to more than 6,000 megawatts. North Carolina and Arizona—states that Trump won—were also on the SEIA top-five list for expectant growth.

Some energy and trade experts said they suspect that the Trump administration didn’t take into account the political dynamics of employment fallout.

“To the extent that the employment impacts can be viewed as political, that’s just coincidental,” a private-industry representative involved in the proceedings, who asked for anonymity because of the sensitivity of the case, said, pointing to the growing threat solar poses to fossil fuel in utility portfolios. “Solar can compete with natural gas, and in terms of deployment in red states, it’s just incredible.”

Greentech Media, an energy-research firm, said the 30 percent tariff will increase solar energy prices by 10 to 12 cents per watt. The tariff rate will decrease 5 percent annually over the next four years, culminating with a 15 percent tariff. That will cut potential U.S. installations by 10 to 15 percent, according to the research firm.

The tariffs will exempt the first 2.5 gigawatts of imported cells during that period.

A spokesperson for the U.S. Trade Representative’s Office, along with other agency officials, didn’t provide comment on employment assessments involved in the tariff decision.

Red-state employment, however, is not the only controversial political dynamic at play. Both domestic petitioners in the case, Suniva and SolarWorld Americas, are insolvent. Suniva filed for bankruptcy in April 2017 in the U.S., while the SolarWorld parent company filed for insolvency last year in Germany.

Those companies asked for far-higher tariffs than the levels imposed by the Trump administration—more than 50 percent in the first year. And many observers that doubt the 30 percent tariffs will breathe new life into the companies.

The U.S. International Trade Commission recommended a 35 percent tariff, known in trade parlance as a remedy, after determining that imports damaged domestic production.

Meanwhile, both companies are exploring options to sell, and such a move could potentially boost the bottom line for SolarWorld’s chief creditor: private-equity firm Centerbridge Partners, whose cofounder Gallogly is a Democratic donor and ally to former President Obama.

In 2017 alone, Gallogly has contributed to Senate Democrats Maria Cantwell, Chris Murphy, Sheldon Whitehouse, and newly minted Doug Jones, among others, while dumping $33,400 each into the fundraising arms for House and Senate Democrats, according to OpenSecrets.org. He also served on Obama’s council on jobs and competitiveness.

“It seems to be a bit odd for the Trump administration to do something that’s damaging to jobs manufacturing the steel that goes into racking systems and construction jobs in the Southeast, where solar projects would fall off if tariffs are high,” said an industry representative opposed to the tariff petition, who also requested anonymity, “only to, kind of, enable a recovery of an investment from a distressed debt-hedge fund controlled by a Democratic donor.”

The remedy investigation looped in a range of stakeholders, including the petitioners, the creditors, other U.S. manufacturers, and utility providers, according to those interviewed.

A Centerbridge spokesperson declined to comment, and USTR said it would not comment on private negotiations. Centerbridge did not testify or provide public comment to the agency, a USTR spokesperson said.

The industry representative opposed to the petition, however, said Centerbridge is playing a role in SolarWorld’s decision-making. “To this day, they continue to drive events with the goal of now pursuing a sale of the North American subsidiary that would be underpinned in value based on the trade relief imposed,” the representative said.

Many observers, however, expected the Trump administration to levy even higher tariffs, and a sale of the company is still far from certain.

What We're Following See More »
USED IN LAS VEGAS SHOOTING SPREE
Trump Says He Signed Order Recommending Ban on Bump Stocks
10 hours ago
THE LATEST
PRIORITIZES ELECTION HACKING
Sessions Forms Cyber Task Force
10 hours ago
THE LATEST
ESCORT SERVICES USED TO WOO RECRUITS
NCAA Strips Louisville of Basketball Championship
11 hours ago
THE LATEST

The N.C.A.A. "upheld penalties against Louisville’s men’s basketball program related to a sex scandal involving players, recruits and prostitutes, and ordered the university to forfeit dozens of victories, including its 2013 national championship." Andre McGee, a former Louisville player serving on the basketball staff in 2013, solicited an escort service that he used to entertain recruits in an on-campus dormitory. Louisville officials called the decision "wrong." It is the first time the N.C.A.A. has stripped a program of the national championship.

Source:
HEARING THIS AFTERNOON
Mueller Indicts Attorney for Making False Statements About Gates
16 hours ago
THE LATEST
THE QUESTION
What’s the Value of Suspicious Transactions by Paul Manafort that Mueller Is Investigating?
16 hours ago
THE ANSWER

About $40 million, "a much larger sum than was cited in his October indictment on money laundering charges."

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login