APPLIED MICRO: Strategic Avoidance and the Welfare Impacts of U.S. Solar Panel Tariffs; Professor Kenneth Gillingham (Yale University)

Abstract

This study examines the effects of tariffs imposed by the United States on imported solar panels. We first provide definitive evidence that tariff-exposed firms shifted production to locations that did not face tariffs. We then develop a structural model to analyze welfare and employment effects. We find that the tariffs led to modest gains for manufacturers with domestic operations, but larger losses in domestic consumer surplus and environmental benefits. Furthermore, the tariffs reduced domestic solar industry employment and wages on net. By contrast, using industrial policy to subsidize solar panel manufacturing could increase domestic production, employment, and welfare.