History of U.S. tariffs and how they relate to solar

From pv magazine 3/25

On Feb. 1, the United States announced a 25% tariff on Mexican goods and non-oil and gas imports from Canada. Canadian oil and gas was hit by a 10% rate, with the same applied to all Chinese imports.

Two days later, Mexican President Claudia Sheinbaum said she had negotiated a one-month delay for the tariffs.

Canadian Prime Minister Justin Trudeau announced a retaliatory 25% tariff on U.S. imports including agriculture, clothing, machinery, wood, paper, and beauty products, with the levies to be introduced over three weeks. A tariff on imported US energy was considered before a one-month stay on the United States’ Canada tariffs was also announced, on Feb. 3.

President Trump is introducing tariffs under the U.S. Tariff Act of 1930 and the International Emergency Economic Powers Act of 1977 (IEEPA), the latter signed into law by President Jimmy Carter in 1977 during the Iran hostage crisis, enabling the president to introduce the charges during a national emergency.

During his first week in office, Trump ordered his proposed cabinet – before their appointments were confirmed – to comprehensively analyze U.S. trade policy by April 1, 2025, including trade agreements, global taxation, and international exchange rates.

The United States has a history of using tariffs in its trade strategy. Import tariffs were used to fund the government until 1862. On the campaign trail, Trump mulled the elimination of federal taxes to instead fund the government on tariff income, to be collected by a new “External Revenue Department.”

History lesson

The 2012, 2014, and 2022 tariffs affecting solar imports were based on the U.S. Tariff Act of 1930. That law, known as Smoot-Hawley, is widely viewed as the most protectionist in the history of U.S. protectionist acts. The act led to the highest tariffs in 100 years, of between 50% and 100% on around 900 products. It also began a global trade war.

President John F Kennedy signed the Trade Expansion Act of 1962 to give the U.S. presidency stronger negotiating power with partner nations. The Trade Expansion Act granted the U.S. president unprecedented power to negotiate tariffs of up to 80%. The act may have been intended as a negotiating tool, but is often used as a cudgel.

The Section 201 Tariffs introduced in 2018, on solar cells and modules, among other imports, were based on the 1974 Trade Act. In theory, that legislation was designed to expand the participation of U.S. manufacturers in global markets and to reduce trade barriers. It also, crucially, gave the U.S. president broad, fast-tracking authority. Under it, the US president can provide temporary relief to an industry. Section 201 of the 1974 Trade Act theoretically sets a high bar for petitioners who want tariffs. Unfortunately, theory and practice often fail to intersect and once the door is open for interpretation based on personal bias and agenda, it is challenging to close it.

Trump declared a national energy emergency on Jan. 20, so the IEEPA, which allows the president to seize property, among other actions, became important to watch, as the administration is clearly testing its powers under the act.

Tariffs and solar

Tariffs are useful as tools to protect domestic industries, but not so much as instruments of economic torture. Regarding the solar industry, manufacturing is dominated by producers based in China who are willing to operate on thin margins. Without some protection to level the playing field against the prices they can offer, there is simply no game.

The Biden administration, while leaving earlier Trump tariffs in place, used such levies as a tool to address the dumping of solar products, the circumvention of international trade norms, and to respond to, or countervail such low prices for Chinese-made products.

At the start of the Biden administrations there was very little domestic solar manufacturing to protect. Thanks to the Inflation Reduction Act (IRA), the United States began 2025 with almost 50 GW of annual PV module assembly capacity and will have 15.5 GW of cell capacity once Hanwha Qcells’ plans are realized.

It is doubtful that the United States could have realized the successful ramping of significant new capacity with tariffs alone. When the Obama administration imposed tariffs, in 2012 and 2014, U.S. solar manufacturing did not expand. Production grew during the Biden administration because of the IRA and, potentially, because the administration maintained tariffs and added new ones. That observation is not an argument for or against tariffs, it’s an observation that as long as the solar value chain remains unbalanced, strategic use of tariffs might be warranted.

Weaponizing tariff policy never turns out well and risks trade wars. Prices for consumables and commodities will increase, trickling down to higher prices for end products.

About the author: Paula Mints is founder and chief analyst of solar-focused company SPV Market Research. She previously worked for Strategies Unlimited and Navigant, where she was director of energy practice until founding SPV Market Research in 2012. Her expertise includes global solar markets and applications; PV cell and module cost and price analysis; system and component analysis, including inverters, trackers and other balance-of-system equipment; and trend analysis.

The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.

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