The U.S. International Trade Commission will investigate whether to extend Section 201 "safeguarding" tariff-rate quotas on imports of solar panels after they expire in February 2022. The tariffs were imposed in 2018 by the Trump administration as part of a wider use of the Section 201 program for washing machines and Section 232 "national security" duties for steel and aluminum.
The extension of the tariffs is a mechanistic rather than political matter and so does not necessarily provide a guide to the Biden administration's thinking on duties. Yet, their continuation would increase the costs of delivering U.S. President Joe Biden's renewable energy aims within the forthcoming infrastructure bill. The tariffs have also been a bone of contention with Canada, even though it represents a small part of U.S. imports. Canadian importers of solar panels that pass through U.S. ports have also seen delays, Bloomberg News reported.
Arguably, the tariffs have been unsuccessful in their primary aim of cutting imports. Panjiva data shows total imports to the U.S. in the 12 months to June 30 increased 45.9% versus calendar 2017. There does, however, appear to have been a rotation toward lower-cost manufacturing centers. Imports from Thailand and Vietnam accounted for 15.9% and 31.7% of the total in the past 12 months compared with 8.4% and 14.9%, respectively, in 2017. That has been offset by greatly reduced imports from China.
More recently, however, there has been a downturn in shipments. Total U.S. imports of solar panels declined 3.5% year over year in the second quarter of 2021, accelerating to a 16.7% drop in U.S. seaborne imports of all solar power equipment in July. The downturn was led by a 70.5% drop in shipments associated with Ningbo Boway New Materials Co. Ltd. and a 39.6% decline in imports linked to Hanwha Corp. Shipments by LONGi Green Energy Technology Co. Ltd. and JinkoSolar Holding Co. Ltd. surged 192.4% and 112.8% year over year, respectively, in the second quarter, illustrating the rapidly shifting shape of solar supply chains.
The U.S. ITC investigation of solar panel imports also raises questions over Section 201 tariffs that have been applied to imports of washing machines. These are conceptually similar in seeking to incentivize local production of components as well as finished product assembly. Panjiva data shows U.S. imports of washing machines in the second quarter increased 66.2% year over year or 32.6% when compared with the same quarter in 2019. The growth came from China and other Asian countries, which saw increases of 46.2% and 63.1%, respectively, in the second quarter of 2021 versus the same period in 2019. European imports just saw a recovery against the pandemic with second-quarter 2021 imports falling 9.4% versus the second quarter of 2019.
Samsung Electronics Co. Ltd. and LG Electronics Inc. may be the best placed to benefit if Section 201 duties are removed, as both companies have been able to increase activity since January 2020. Imports associated with Samsung increased 90.8% year over year in the second quarter, with growth in January slowing to 5.8%. LG's growth was more explosive, with imports increasing 339.5% and 292.1% year over year in the second quarter and July, respectively. AB Electrolux and Haier Group Corp. have not had as much success, with imports of washers by both companies falling 43.5% and 52.2% year over year, respectively, in the second quarter. One strategy that washing machine companies are using is raising pieces and passing those onto consumers, as discussed in Panjiva's research of April 30.
Eric Oak is a researcher at Panjiva, a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.