US Finds Chinese Solar Companies Dodged Sanctions: How The Market Is Reacting

Shares of U.S. solar stocks including Sunrun Inc. RUN, First Solar, Inc. FSLR, Solaredge Technologies Inc. SEDG and Enphase Energy Inc. ENPH are rising as a result of U.S. officials' discovery that four of the eight major Chinese solar companies under investigation recently tried to avoid tariffs.

What Happened: In a trade dispute that has pitted supporters of clean energy against domestic producers of solar panels, the Department of Commerce launched an investigation in March to determine whether Chinese solar producers were improperly evading the Biden Administration's solar tariffs by importing goods through Southeast Asian nations.

According to the Department of Commerce, the preliminary decision covered the Thai operations of Canadian Solar, Trina Solar, BYD Cambodia and Vina Solar Vietnam.

The Department of Commerce will now carry out on-site audits in the upcoming months to confirm the data that formed the basis of its finding.

What Does This Mean? The focus of the investigation was on whether Chinese businesses attempted to get around tariffs the U.S. imposed on low-cost solar panels imported from China.

The key question in the case is whether Chinese businesses are actually using Southeast Asian nations as significant locations for manufacturing, or if they are making minor adjustments to goods that are primarily manufactured in China in an effort to circumvent American trade regulations, the Wall Street Journal noted.

“The only good news here is that Commerce didn’t target all imports from the subject countries,” said Abigail Ross Hopper, CEO of Solar Energy Industries Association. “Nonetheless, this decision will strand billions of dollars worth of American clean energy investments and result in the significant loss of good-paying, American, clean energy jobs.”

Why It Matters: Back in June, President Joe Biden declared a 24-month tariff exemption for solar panels from four Southeast Asian nations after an investigation halted imports and postponed projects in the U.S.

In addition to allaying business fears about holding vast sums of cash in reserve to cover prospective tariffs, the action was taken to guarantee that the U.S. has an adequate supply of solar panels to support the energy transition and slow down climate change.

“While President Biden was wise to provide a two-year window before the tariff implementation, that window is quickly closing, and two years is simply not enough time to establish manufacturing supply chains that will meet U.S. solar demand,” Hopper continued.

The Coalition for a Prosperous America, an organization that supports American industry, demanded the Biden administration retract its declaration, claiming that the tariff exemption offered Chinese manufacturers a "free pass" to ignore U.S. trade rules.

Read Next: In The Know: Janet Yellen Says Should Not Overestimate Effect On Inflation Of Lowering Tariffs On Chinese Goods

Photo: Terelyuk via Shutterstock