Even as the Obama administration works overtime to wind down two wars, in Iraq and Afghanistan, it could well be on the brink of opening up a new battle front — an economic slugfest with China.
This week the U.S. Commerce Department announced, after months of hand-wringing and suspense, that it would be imposing tariffs on solar panels made in China, after investigations supposedly revealed that Chinese manufacturers were receiving significant amounts of ‘ illegal' subsidies for the clean-tech product.
While President Barack Obama has been a strong advocate of clean energy and made it a domestic policy priority, engaging China on questions of the World Trade Organization-legality of its subsidy system had to be situated in the broader context of economic disputes between the two nations.
The White House has generally shied away from drastic moves in this regard, for example, not yielding to Congressional pressure to label China a ‘currency manipulator.'
Yet this week the government took the significant step of slapping a tariff of between 2.9 per cent to 4.73 per cent on Chinese solar panels.
However, contrary to any expectations of an angry response from Chinese authorities, articles in the nation's state-owned media said, “The U.S. government's lighter than expected tariffs on China's solar panel imports reflects some degree of rationality, but it has to do more to keep bilateral trade ties from derailing.”
To an extent, the balanced reaction from China reflects the fact that the U.S.' prospects for successive tariff-escalation are self-limiting. This is because tariffs may prove to be a double-edged sword because while they may boost job creation in the U.S. solar panel industry, they would also likely result in cost spiralling where Chinese-imported panels are used.
The fact is that Chinese-made solar panels are not only used heavily in the U.S., but they have, in fact, been the prime driver of growth of the U.S. solar energy industry. Such imports have contributed to the U.S. overtaking China last year by making $56-billion worth of investments in clean energy, compared to China's $47.4 billion.
Yet, according to figures from the Guardian, U.S. imports of Chinese solar panels grew exponentially in recent years too, from $21.3 million in 2005 to $2.65 billion last year.