Strategic Avoidance and the Welfare Impacts of U.S. Solar Panel Tariffs

This study examines the consequences of U.S. tariffs on imported solar panels. The authors first show that tariff-exposed firms shifted production to non-tariffed locations and that domestic prices increased relative to other markets. They then develop a structural model to assess welfare effects. The results indicate that the tariffs generated modest gains for domestic manufacturers and for government revenues, but larger losses in domestic consumer surplus and environmental benefits, thereby reducing domestic welfare. Furthermore, the tariffs reduced employment and wages in the domestic solar industry. In contrast, subsidizing solar panel manufacturing could increase domestic production, employment, and overall welfare.