You know why they say tariffs are always “slapped” onto certain imports? It’s because a slap is a good way to question someone’s honor. It’s a little humiliating. A resounding slap invites a reply, but it doesn’t demand one in the same way that “five across the lip” does.
So the U.S. is about to slap tariffs on Chinese electric cars and solar panels. Of course, China feels no shame for dumping heavily subsidized products like EVs and solar panels into other countries at below-market prices. That’s been China’s export model for over 20 years.
It’s easy to see that China’s model has cost millions of American jobs and gutted the manufacturing sector.
But it’s not as easy to see that the influx of cheap Chinese goods helped keep a lid on inflation for 20 years. Steel, lithium batteries, solar panels, and especially electronics…
Thank goodness the U.S. finally woke up to the fact that this is not a zero-sum game.
Lose enough jobs overseas, force U.S. workers to compete with China’s subsidized prices and the eventual outcome is inevitable: the U.S. simply loses the economic contribution from a big chunk of the population – both production and consumption.
It won’t be a popular thing for me to say, but if you want to rebuild America’s manufacturing dominance, it’s going to cost.
If you want “Made in America” to mean something again, then some inflation is inevitable. Unless you think American workers should get paid Chinese wages.
Protectionist economic policies often get a bad rap. Some economists say that things like tariffs hurt competition and cooperation. That’s just what you’d expect from an economist plugging numbers into economic models from college textbooks.
Out here in the real world, it’s just naive to think that China is playing on a level field. So slap away…
Solar and EVs
Now, there are still plenty of companies licking their chops at the sheer size of China’s consumer market. Companies like Tesla, Apple, GM and Starbucks have made massive investments in China and will oppose U.S. action because it puts their investment in the crosshairs. Elon Musk just flew to China to try and save Tesla’s Chinese market. Apple’s CEO Tim Cook made a similar trip a couple months ago.
As far as I’m concerned, Musk and Cook made their bed, now they can sleep in it.
Tariffs on Chinese EVs are a good thing. They will help save U.S. auto manufacturing as we know it. Can’t say I’m wild about any opportunities with U.S. EV stocks, because growth has slowed more than expected and even a company like Rivian (NASDAQ: RIVN) is struggling.
But solar, that’s a different story. And it’s an AI story.
My Outsider Club colleague Christian DeHaemer and I were among the first to start pointing out the massive amounts of electricity that AI and the data centers that power it need. America has not seen a boom for electricity demand like this in decades. (You can read more about it here and here).
The Wall Street Journal says that in the next three years, “…renewables are projected to make up 23.7% of total electrical-power generation in the U.S., while natural gas is expected to slip to 21.9% and coal to 28.9%.”
Microsoft (NASDAQ: MSFT) just signed the biggest renewable energy supply deal in history with Brookfield Renewable Partners (NYSE: BEP). Brookfield will supply 10.6 gigawatts of power from 2026 to 2030.
Brookfield share price jumped on the news, as you can see on this 3-year chart:
It’s also well below its highs north of $40 and it pays a 5% dividend.
First Solar (NASDAQ: FSLR) should be a big winner from U.S. tariffs on Chinese solar panels.
First Solar is the biggest U.S. solar panel company. It’s expected to grow earnings from $13.50 a share this fiscal year to over $21 a share in fiscal 2025. That’s a forward Price-to-Earnings of 8.3 for fiscal 2025. In other words, it’s cheap.
First Solar is valued at $18 billion and should finish the year with $4.5 billion in revenue, which jumps to $5.6 billion next year. It has $1.5 billion in net cash.
Investors are obviously pretty bullish on FSLR stock. The company has a backlog through 2027 and can sell every panel they build.
Investors are just starting to clue in to the looming bull market for electricity generation stocks. The time to own these stocks is now. Christian and I will be sharing more electricity stock opportunities with you going forward…
Godspeed,
Briton Ryle
Chief Investment Strategist
Outsider Club
X/Twitter: https://twitter.com/BritonRyle
For your reading pleasure:
A little more detail about the U.S. tariffs on China
It’s a good time to buy Bitcoin
https://www.outsiderclub.com/wall-st-wants-you-out-of-bitcoin/
This is a great World War II story
https://www.outsiderclub.com/the-last-plane-from-stalingrad/
