This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Tariffs Create Storm Clouds Over Solar Stocks

NEW YORK ( TheStreet) -- The U.S. Department of Commerce has decided it's an excellent idea to intensify trade tensions with China. The situation would be laughable if real taxpayer money were not at stake. After losing over $500 million dollars from a loan guarantee with Solyndra (money at least in part was borrowed from China), the Commerce Dept. is now imposing anti-dumping tariffs on Chinese solar companies.

Solyndra is the poster child of why private equity is more efficient than taxpayer money chasing political goodwill and feel-good pet projects. At the same time the government was dumping hundreds of millions in dollars down the drain, private enterprise cracked enough natural gas to kill any thoughts of solar gaining traction for years to come.

In an almost perverse twist of fate, some companies who are the targets of the tariffs may end up winning in the long run. Many smaller solar manufacturers in China are faced with a virtual product-banning 250% import tariff. However, two or three key companies are expected to "only" pay 31% according to Peter Pham of The companies may find the tariff a benefit in multiple ways, if they can last long enough to make it through the other side. All told, it appears 61 companies are members of the 31% club, while other factories face 249.96%.

Suntech (STP) , Trina Solar (TSL - Get Report) and possibly others including LDK Solar (LDK) are Chinese companies reportedly to pay an anti-dumping 31% tariff. The disparity will leave other higher tariff paying companies with several choices:
  • Fold up the tent and go out of business;
  • Sell the business to another company;
  • Sell production to companies facing lower tariffs, which will in turn sell the products;
  • Look for markets outside the U.S.
  • If Suntech and Trina Solar can leverage the advantage over other producers enough to offset their own increased cost of business, they could end up winners almost immediately. Even without an immediate positive impact, both may end up winners.

    Remaining major solar manufacturers could be well positioned to grab market share when the Commerce Department ends the increased tariff. A decrease in the number of companies to compete with doesn't necessarily result in lowered overall competition.

    Fewer, albeit larger companies may result in new formidable competition. The world is awash in solar production capacity. European countries such as Germany have backed off from subsidies, and American based SunPower Corporation (SPWR) and
    1 of 2

    Check Out Our Best Services for Investors

    Action Alerts PLUS

    Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    Quant Ratings

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    Stocks Under $10

    David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    14-Days Free
    Only $9.95
    14-Days Free
    Dividend Stock Advisor

    David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Updates with exact steps to take - BUY, HOLD, SELL
    Trifecta Stocks

    Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

    Product Features:
    • Model Portfolio
    • Intra Day Trade alerts
    • Access to Quant Ratings
    Real Money

    More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

    Product Features:
    • Access to Jim Cramer's daily blog
    • Intraday commentary and news
    • Real-time trading forums
    Only $49.95
    14-Days Free
    14-Days Free
    LDK $0.00 0.00%
    STP $0.53 0.00%
    FSLR $56.17 2.35%
    TSL $9.43 3.51%
    AAPL $118.88 0.96%


    Chart of I:DJI
    DOW 17,812.19 +19.51 0.11%
    S&P 500 2,089.14 +2.55 0.12%
    NASDAQ 5,102.8080 +0.33 0.01%

    Free Reports

    Top Rated Stocks Top Rated Funds Top Rated ETFs