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A Look Ahead To Trump's Decision On Solar Tariffs

Wayne Duggan

The first major market-moving decision from Washington, D.C. in 2018 is on the way before the end of January, and it could have a huge impact on solar stocks.

President Donald Trump must decide by Jan. 26 whether or not the U.S. will impose tariffs on imported solar cells and modules under Section 201 of the Trade Act of 1974.

A tariff on solar imports would be huge news for domestic solar companies and would likely boost module prices.

Trump may not take as hard-lined of a stance as investors think on solar tariffs, Height Securities analyst Kate Bays said in a Thursday note. 

The International Trade Commission has recommended up to a 35-percent tariff in imported panels, Bays said. 

“While the ITC softened their recommended tariffs (relative to the petitioners Suniva and SolarWorld's request), Trump might back off further under pressure from free trade Republicans and domestic manufacturers that depend on the cheap imported products,” she said. 

The basis for the Section 201 case is that Chinese panel manufacturers have manipulated the solar panel market, making it difficult for U.S. manufacturers to compete.

Trump’s decision will likely be determined by who wins the president’s ear in the weeks leading up to the announcement, Bays said. Height estimates there is a 75-percent chance Trump will opt for a tariff of 20 percent or less.

While high tariffs would be good news for domestic manufacturer First Solar, Inc. (NASDAQ: FSLR) and Canada’s Candian Solar Inc. (NASDAQ: CSIQ), Bays said it would raise costs for SunPower Corporation (NASDAQ: SPWR) and SunRun Inc (NASDAQ: RUN).

The Guggenheim Solar ETF (NYSE: TAN) is off to a spectacular start to 2018, rising more than 5 percent since the beginning of the year.

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