Tariffs aimed at protecting the U.S. solar industry from foreign competition went back into effect Thursday, ending a two-year pause approved by President Biden to boost U.S. solar adoption.

The tariffs, which will apply to certain solar products made by Chinese companies in Southeast Asia, come amid growing global concern about a surge in cheap Chinese solar products that are undercutting the competitiveness of U.S. and European manufacturers.

The Biden administration has been trying to grow the U.S. solar industry by offering tax credits, includingMore than 30 companiesBut U.S. solar companies say they are still struggling to survive as Chinese and Southeast Asian competitors flood the global market with solar panels at prices far below what U.S. companies need to stay in business.

That forces President Biden to make a tricky choice: continue to welcome cheap imports that help the U.S. transition away from fossil fuels, or block them to protect new American solar plants being built with taxpayer money.

The tariffs that took effect Thursday reflect that dilemma. They apply to certain solar products imported into the U.S. from Cambodia, Thailand, Malaysia and Vietnam.Approved two years agoThe U.S. government imposed a $250 million tariff on Chinese goods in 2013 when U.S. officials ruled that some Chinese companies were trying to circumvent tariffs previously imposed on China by using other countries. The exact tariff rate depends on the company but can be more than 250%.

Chinese companies have set up factories in Southeast Asia, but Commerce Department officials said some do not actually manufacture there. Instead, they use factories in those countries to make slight modifications to solar products made in China and then sell them to the United States duty-free.

The products were supposed to be subject to additional tariffs, but the Biden administration made the unusual decision in June 2022 to suspend the tariffs for two years to ensure the U.S. still has access to adequate solar panels. Congress passed a resolution last year to restore the tariffs, but BidenVetoed the resolution.

The administration called the decision to suspend tariffs a compromise. Groups such as the American Clean Power Association, which represents utility-scale solar and energy storage companies, argued that imposing tariffs would hurt U.S. efforts to combat climate change. But the decision angered many domestic solar manufacturers that the Biden administration also wants to help.

In the two years since the Biden administration decided to suspend tariffs, solar prices have fallen sharply, and solar panelsImport surge.

Danny O’Brien, president of corporate affairs for Qcells, which makes solar panels in Georgia, said nearly two years of subsidized imported solar panels have been piling up in U.S. warehouses. “We welcome the significant steps President Biden has taken to level the playing field,” he said. “But if we want to build a durable domestic supply chain, meet climate goals, continue to create jobs and increase energy security, the Biden administration’s industrial policy needs to go further and be more forceful.”

Biden administration officials have become increasingly vocal over the past year about the risks posed by imports and the need to protect emerging factories, some of which are located in key electoral states.

In March, Treasury Secretary Janet Yellen gave a speech at the Norcross, Georgia, plant of Suniva, a struggling local solar manufacturer that received subsidies through the Inflation Reduction Act of 2022. Yellen noted that the company, which filed for bankruptcy in 2017, would restart solar cell production this year.

However, she also said such investments could be threatened by overcapacity in China’s green energy technology industry. “China’s overcapacity distorts global prices and production patterns, hurting American companies and workers as well as companies and workers around the world,” she said.

At an April news conference in Beijing, where she met with senior Chinese officials, Yellen again raised the Suniva situation, recalling that Suniva’s financial problems began more than a decade ago when China began to ramp up production of cheap solar panels.

She said that while the company now had more support from the U.S. government, “China’s continued investment in capacity in these areas, outpacing growing global demand, could indeed begin to threaten companies like this one.”

It is unclear how many Chinese companies that use Southeast Asia as a transit point will still face tariffs, if any. Industry executives say many companies have built factories in Southeast Asia over the past two years, which could allow them to argue that they actually produce there, rather than just shipping products through those countries to circumvent tariffs.

Meanwhile, U.S. solar manufacturers are beginning to demand broader protections. In April, a group of U.S. solar manufacturers filed another series of lawsuits with the Commerce Department and the U.S. International Trade Commission, asking them to investigate unfair subsidies and pricing practices at factories in Cambodia, Malaysia, Thailand and Vietnam.

The panel is due to make a preliminary ruling on Friday on whether U.S. companies have been harmed by the practices. If the administration makes such a determination, it could impose additional tariffs on imports from Southeast Asia, a major source of solar panels for the U.S.

“We don’t expect the removal of tariff benefits to have much of an impact because Chinese-owned and China-based companies have already adjusted their production methods to avoid the circumvention cases,” said Timothy Brightbill, an attorney at Wiley Rein LLP who represented the U.S. solar manufacturers in this latest case. “Our case is very important because it is, in some ways, a continuation of the circumvention cases.”

The back-and-forth over tariffs highlights the dilemma the United States faces as it tries to sever some ties with China, which is particularly difficult in green industries such as solar panels, critical minerals and electric vehicle batteries where China dominates global production.

At every stage of the production chain, from the raw material of polysilicon to the final solar panel, China accounts for 50% of the global solar supply.80%above.

Strong support from the Chinese government, as well as the huge economies of scale achieved by Chinese industry, have enabled Chinese manufacturers to offer products at very low prices. According to Wood Mackenzie, the cost of producing solar panels in China is only 9 to 11 cents per watt, while the cost of producing solar panels in the United States is 27 to 33 cents per watt. In order to compete with imported products, many American factories are currently selling components at cost or at a loss, according to Wood Mackenzie.

Those low prices sparked a surge in imports. The U.S. imported a record 54 gigawatts of solar panels in 2023, up 82% from 2022, according to S&P Global.

Some argue that the U.S. should take advantage of these low prices to build up its own solar supply. But oversupply also puts Biden’s plan to revive U.S. green energy manufacturing at risk. Some new manufacturers have been dissuaded from opening factories in the U.S. In February, a Massachusetts company called CubicPV Inc.Cancelplans to build a solar wafer factory, citingPrice crash.

Under the rules, companies technically have until December to install all solar panels that come into the U.S. duty-free or they’ll have to pay back taxes.

“Companies are now scrambling to use up inventories over the next six months,” said Mona Dajani, global co-chair of Baker Botts Energy Infrastructure and Hydrogen. “Many in the industry will certainly be watching closely to see how this affects installation and pricing numbers in the coming weeks.”