China’s oversupply of solar panels offsets effects of Trump’s tariffs

The ongoing trade war between the U.S. and China is causing all sorts of effects in different sectors of the economy. U.S. President Donald Trump’s decision to raise $34 billion worth of Chinese goods was retaliated with China’s own tariff on U.S. products.

This has resulted in a number of unexpected movements in various industries, but there are some that have offset an almost 10 to 30 percent increase in prices on some goods due to the tariff hike.

In the solar panel market, for example, an ongoing decline in global prices of solar panels is almost offsetting the tariff effects of Trump’s tariff, Reuters reported. The said products, particularly those produced in China, had a price increase of nearly 30 percent because of the import tax.

The price drop was caused by China’s oversupply of solar panels after the nation recently announced specific changes in incentives for using such a product in their country. This meant that most of the surplus panels are now being sold at really low prices, and even with the tariff hike, the power system is still considerably lower even before Trump’s import tax announcement.

Although the global price drop still meant less profit, buying companies offset this as they can now purchase more solar panels especially for those with larger projects.

“If you are building a large power plant your pricing has certainly come back at least halfway to what it was pre-tariff if not all the way. It’s muting the impact of tariffs,” said SunPower CEO Tom Werner after reporting the company’s second-quarter financial results.

SunPower operates as manufacturer and installer of solar power systems. With the installations, the company is currently getting more profit due to the global price drop. And since most of its manufactured products are primarily produced in the Philippines and Mexico, SunPower is seeking to be exempted by the current tariff hike.

More hike happening soon

And it seems the trade war won’t be ending soon.

According to CNN, the Trump administration is planning to implement a 15 percent increase on the tariffs on $200 billion worth of Chinese products, raising the previous rate from 10 percent to 25 percent.

Although the decision is not yet final, it might take effect as soon as September comes. Talks between U.S. and Chinese officials did little to ease tensions, and they continue to lock horns in the trade war.

In addition, Robert Lighthizer, the U.S. Trade Representative, unveiled a list of Chinese exports with an overall value of $200 billion that can possibly earn a 10 percent tariff. These exports include vegetables, fruit, refrigerators, handbags and baseball gloves, among others.

Cause and effect

Ever since the hike, various industries have reported the effect of additional import taxes on specific products. The most affected are electronic products, as well as other industrial materials like batteries, electrical equipment and machinery products, which the U.S. highly relies on.

The country imports over one-third of the products, with most of them coming from China. Sectors like motor vehicles, aerospace, construction, machinery and energy industries are the most affected of the tariff hike.