Biden tariffs can be deflationary for energy: First Solar CEO

President Biden announced new tariffs against China last week in an effort to strengthen American manufacturers. One of those industries is solar energy — the tariffs raised taxes on imported solar panels to 50% — and First Solar (FSLR) CEO Mark Widmar joins Market Domination to discuss how he expects the sector to be impacted.

"The tariffs that were announced last week were just another step in trying to create a stable policy environment to ensure that there's a level playing field here in the US to make meaningful investments," Widmar explains. He says that a stable policy environment will spur innovation and ensure a return on invested capital.

"99% of the product that is going into Europe is supplied from China, and we all know that China also has a tendency towards retaliation," Widmar adds.

He goes on to say that the US needs to ensure long-term energy independence and security, as the solar sector remains competitive: "I don't see why we, as a country, or really any country, should have that ripple effect come into their domestic market. If China wants to create significant overcapacity three or four times their domestic demand, let them do that and let the bloodbath stay in China."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video Transcript

Well, President Biden last week announcing $18 billion in tariffs against China.

One industry, those tariffs are meant to benefit is solar.

As us producers have been struggling to grow amid competition with China.

Our next guest says we're one incident away from supply chain chain disruption and job losses for more.

We're bringing in first solar, Ceo Mark Widmark Mark.

Thank you so much for being here.

Um So talk to us about um your thoughts on these tariffs and, and what you mean by the sort of insecurity or, or your view of the insecurity of the supply chain?

Sure, then the tariffs that were announced last week were just another step and trying to create a stable policy environment to ensure that there's a level playing field, you know, here in the US to make, you know, meaningful investments.

I'm here today in our R and D facility.

First of its kind, almost a $500 million investment that we're making here in all a not just for manufacturing, but for innovation and next generation technology.

Those types of investments that you make that have to be enduring for multiple years need to have a backdrop of a stable policy environment.

So you can ensure you can get a return on invested capital.

So the type of policies and tariffs that were put in place uh announced last week plus some of the other changes made by the administration give companies like mine as well as others confidence to make these types of investments.

So yeah, I I noticed that your stock happens to be up 13% this year.

A lot of your competitors stocks uh is down, is down for the year, quite a bit more.

What policies do you think you've implemented that have allowed uh your shareholders to uh treat your stock a little bit better than some of your competitors.

Look, I think it all started with the, you know, inflation Reduction Act, you know, that was announced a couple of years ago now, almost two years ago now um that enabled kind of this first of first of a kind opportunity for this industry, a whole of industry approach that could now see across the balance of this decade.

Um Whether you're a developer, whether you're owning of generation asset, where you're part of the supply chain to really understand a demand profile that was enduring.

So it starts with that.

So it's kind of like the first step in, you know, the industrial policy, uh the domestic content policies that have come out now that enable or support domestic manufacturing is another step.

And then a level playing field is the third step in that process.

And once you have all three legs to the stool, you know, you have an opportunity to see the type of growth that we're demonstrating here, not just with our R and D facility, but we're making an expansion to manufacturing capacity outside of Ohio into Louisiana and Alabama.

And when we, we see ourselves through the next couple of years as we exit 2025 we'll have 14 gigawatts of capacity.

And maybe that's not really a number that a lot of your the listeners fully understand.

So maybe translate that into jobs.

We'll have created direct, indirect and induced jobs, 30,000 jobs here in the US with a domestic manufacturing supply chain and a $2.8 billion annual payroll impact.

So that's what we're doing by making investments here in, in the US.

Um We provide certainty to our customers and it's showing up in the demand for our product um mark while these tariffs may be good for the, the uh domestic solar industry, they're not necessarily good for the domestic energy transition.

For example, if you, you were just talking about the, the installations that we have seen here in the U SI I believe that the US uh last year installed half the amount of solar capacity as Europe, for example, Europe doesn't have tariffs, they're importing that cheap stuff from China.

And because of that, they are further along and much further along and their solar installations.

So do you have here a problem where the need to have an energy transition is a little bit in conflict with the need to support domestic solar production industry.

Yeah, Europe's faced with a different dynamic right now and it's really given obviously between the Ukraine Russian war and the heavy dependence on an adversarial country for natural gas.

I mean, that's the reality of what happened and they had to pivot very quickly and accelerate, you know, their deployment of alternative energies and renewables, whether it's solar or wind being one of them, but they're also very vulnerable now because now they've traded that potential adversary counter party which was Russia now for dependency on China, you're right, 99% of the product that is going into Europe is um is supplied from China.

And we all know that China also has a tendency towards retaliation and Europe is actually taking some actions right now.

They're trying to create a more level playing field and, and, and the Chinese are actually starting to retaliate.

I think when you look at what we're doing here in the U SI, think you have to have a strategic lens that plays the long game on how do we ensure long term energy independence and security and how do we ensure that we don't have uh over reliance on any one particular country, especially one that could be an adversarial counter party.

Um Solar is very competitive.

Um The impact of these tariffs are going to be relatively de minimis and really, they're only there in place because China has created such oversupply and overcapacity and even in their own market right now, they're selling below cash cost.

I don't see why we we as a country or really any country should have that ripple effect come into their domestic market.

If China wants to create significant overcapacity, three or four times their domestic demand, let them do that and let the bloodbath stay in China.

There's no reason it should bleed into the into the US as an example.

But let me get back to the point on on pricing um tariffs, let's say the tariffs add 10 cents a watt to a module that to a power price is about $3 a megawatt hour to a kilowatt hour, which is most, what most ratepayers see it about 3/10 of a cent, a cent, excuse me.

And it's a fixed price for 3540 years that you own that generate asset because other than the sun taking photons and making electrons, there is no input cost, there's really no moving parts.

So it becomes deflationary by by definition.

So I think we have to look long term and strategically, yes, some tariffs may be needed near term to allow a domestic industry, industry to scale.

But when you look across the horizon and what value proposition that's being created, I think it's it's well worth the short term impact to the extent there are any of the long term potential mark.

Um as you mentioned, um There is also, there are also incentives in place here in the US uh through the IRA.

Your company is gonna be the beneficiary of uh I believe an estimated a billion dollars this year through section 45 X of the IRA.

You also, it's my understanding would push not just for tariffs on China but also on some of the other solar panel producers, places like Vietnam, the Philippines, Malaysia.

I it's my understanding why do we need all those measures.

In other words, if you're already getting these incentives in the US, the tariffs are already on China, why then also the tariffs on some of our trading partners that are not adversaries?

Yeah, let me put it in perspective.

One thing first on, on the benefit of Ira, put it in perspective relative to the investment.

I mentioned the R and D facility that we're making here, one of a kind first of its kind um to really evolve and allow for next generation technology to um to be developed.

That's about a half billion dollar investment in my new factory expansions that I've made in Alabama and Louisiana plus plus the investment we were making here in Ohio to expand existing capacity.

There's another $2.5 billion.

So I'm making $3 billion of investments here in the us market um before we're really receiving any meaningful benefit from Ira yet.

So what I want to put that in perspective as it relates to the um the impact to Southeast Asian countries that are part of the most recent petition, they're all Chinese owned and controlled companies, right?

So that's, that's the root root of this challenge that we're still trying to deal with.

China has basically circumvented the tariffs that they were put in place directly against China by moving some production into Southeast Asia and some of the countries that that you mentioned.

But they're still heavily subsidized through supply chains that come from China through tooling and equipment that comes from China, even through um Belt and Road type of initiatives and low cost financing.

So if, if that's the fundamental that still needs to be addressed because of the circumvention, because of the movement of supply chain, the vulnerability still exists.

And this is really to address Chinese own and control companies that happen to move some portion of the supply chain into Southeast Asia Mark.

Thank you for your time today.

Really appreciate it.

Thank you very much.