Trade wars benefit nobody, but we may need to brace for one soon. This month, China is set to decide on whether to place a tariff on U.S. chemical imports—specifically polysilicon—used in the solar cell manufacturing process. Chinese polysilicon producers accuse the U.S. of dumping said chemicals onto the Chinese market. If the Chinese do impose a tariff, American polysilicon producers will lose access to a significant market while the cost of solar panels will rise significantly everywhere—making everyone a loser. Yet this bad outcome is likely because the Obama administration has already fired shots in what could become the world’s first “green” trade war.
The Department of Commerce fired those shots last October, when it levied a 31 percent tariff on Chinese solar panel imports, supposedly as a “retaliatory antidumping measure” against “unfair” government subsidies to Chinese manufacturers that subsequently dumped their product onto the U.S. market.
Of course, “unfair” is a relative term. In 2010, U.S. officials reported that China spent $30 billion on subsidies to solar energy, which led President Obama to accuse China of “questionable competitive practices.” Yet his administration spent $60 billion in domestic renewable energy subsidies in 2010. Currently, it offers a 30 percent tax credit for any business investing in solar energy and a renewable energy grant equal to that 30 percent to businesses purchasing solar power systems.