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Solar Stocks: Wait Out the Tariff Wars

New U.S. duties on Chinese panels could do more harm than good

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The solar sector can’t seem to catch a break these days. Everything from an abundance of oil and natural gas flooding storage facilities in the U.S. to recent policy moves in the European Union have conspired against the renewable-energy sector — and photovoltaics makers in particular. It seems that every breakthrough is followed by a huge step backward.

One of the biggest has been unfair business practices in China. U.S. regulators have accused Chinese solar manufacturers, including China Sunergy (NASDAQ:CSUN), of selling their panels and wafers  below cost, which they can do because of generous subsidies from Beijing. According to the complaint, these artificially low prices are pushing American manufacturers out of the industry.

This below-cost pricing has caused photovoltaic-module prices to plunge more than 75% over the past three years and has claimed a variety of victims. Solyndra, which filed for bankruptcy in August despite receiving $535 million in federal loan guarantees, was said to be a direct casualty of illegal Chinese dumping.

The complaint was filed by the U.S. subsidiary of Germany’s SolarWorld (PINK:SRWRY) and six other U.S. companies. Back in November, the U.S. Commerce Department said it would investigate. That inquiry has finally come to a head, with the U.S. imposing a series of tariffs on imported Chinese photovoltaic modules averaging 30% — more than what analysts and China had expected.

The import tax applies to the bulk of exporters, including Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL). Overall, 59 Chinese solar producers will be affected by that 30% duty. However, some manufacturers could see fees as high as 250% because the U.S. ruling is retroactive and designed to cover imports dating back 90 days. Two months ago, Washington set tariffs of less than 5% on solar imports from China.

Beijing wasn’t thrilled, citing the lack of fairness in the latest tariffs. Already, analysts have speculated that Chinese companies could circumvent the restrictions by buying cells and wafers for panels from Taiwan and assembling them outside of mainland China.

The group that filed the complaint heralded the Commerce Department’s move. SolarWorld U.S. President Gordon Brinser said, “Commerce today put importers and purchasers on notice about the consequences of importing illegally subsidized and dumped products from China.” SolarWorld had asked for levies of more than 100% on Chinese producers.

But Canadian Solar (NASDAQ:CSIQ) Chairman and CEO Shawn Qu said the move “is unwarranted and will inflict losses on the entire solar industry. Limiting trade in solar products will cause panel prices to increase, defeating America’s goal of driving down costs and hindering its move toward a clean energy future.”

Article printed from InvestorPlace Media,

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