Did someone say trade war?

The U.S. and China appear to be inching closer and closer to a trade war over renewable energy. The latest news is that China is imposing tariffs on polysilicon imports, the critical raw material required to make solar panels. While unsurprising, it’s also hard to imagine what China’s case is when it comes to the price of polysilicon, which is a raw material and extremely unlikely to be subject to export subsidies.

I suspect from China’s perspective, there’s a bit of the old, “you stay out of our business, we stay out of yours sort of mentality.” The original question of whether China was actually providing export subsidies is always a complicated one. At which point does government support become a subsidy. Did the loans the federal government made to GM to help it avoid bankruptcy amount to a subsidy? I mean, not really, but it did allow GM to be more competitive. And the view in many Asian countries is that anything the government can do to aid a company is really fair game.

The risk here is that this trade skirmish, which right now is contained to solar, could get bigger. China is already talking about tariffs on European wine, which is a warning shot with regard to the E.U.’s continual efforts to implement solar PV tariffs. I’m not sure how this will all end, but the irony of the most recent tariffs is that Chinese solar manufacturer’s aren’t all that happy since their raw material costs just went up. Which means their panels are going to get more expensive in the world market. Wasn’t that what everyone wanted in the first place?

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Adam Lesser

Analyst Gigaom Research

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