US solar industry gets unlikely boost from the Trump administration

Key Points
  • U.S. manufacturers First Solar and SunPower could be among the winners following the announcement that the Trump administration will impose a 25% tariff on bifacial panels, although analysts warned that the new tariffs could be an overall negative for the industry.
  • This special type of panel, which absorbs light on both sides, was previously exempt from the tariffs.
  • Foreign makers such as JinkoSolar and Canadian Solar were moving lower following the announcement.

Some U.S. solar stocks could get a boost after the Trump administration announced that it will impose tariffs on bifacial solar panels. This special type of panel, which absorbs light on both sides, will be subject to a 25% tariff beginning on October 28.

Bifacial panels are gaining traction since their double-sided nature means they absorb more power and are therefore more efficient. But they are still in the somewhat early stages of development as manufacturers try to find cost-effective ways to fully utilize both sides of the panel. They're also still a relatively small part of the ecosystem, with BloombergNEF estimating that they made up about 3% of the global market in 2018.

First Solar and SunPower were among the winners at the open, gaining as much as 4% and 10% respectively, although the stocks quickly reversed course and ultimately ended the day about 4% lower as concerns about what the new tariffs will mean for the overall industry weighed on the sector as a whole.

Tariffs on solar imports have been in place since January of 2018, but this past June the Trump administration announced that bifacial panels would be exempt from the import tax, so the sudden reversal of the exemption on Friday came as a surprise to the Street.

"Most investors had expected some form of cap to be put in place and not an outright reversal of the policy," Cowen analyst Jeffrey Osborne wrote in a note to clients, while Goldman Sachs' Brian Lee said to "expect significant volatility across solar equities near-term" following the announcement.

There was a ramp in bifacial panel production following the tariff exemption announcement in June, which prompted the trade department to ultimately reverse its decision.

"After evaluating newly available information...demonstrating that global production of bifacial solar panels is increasing, that the exclusion will likely result in significant increases in imports of bifacial solar panels, and that such panels likely will compete with domestically produced monofacial and bifacial CSPV products in the U.S. market, the U.S. Trade Representative has determined, after consultation with the Secretaries of Commerce and Energy, that maintaining the exclusion will undermine the objectives of the safeguard measure," the Office of the United States Trade Representative announcement said.

Lee believes that United States-based manufacturers like First Solar and SunPower will be "key beneficiaries," with Osborne saying it's the "best possible outcome for domestic producers of solar panels." On the flip side Lee said that "Chinese solar players with bifacial capacity expansion plans (JKS, CSIQ)" will "likely the most negatively impacted from this unexpected development." 

- CNBC's Michael Bloom contributed reporting.