Solar tariffs will hit allies, not China

The US is set to impose tariffs of up to 56% on solar imports from Vietnam, Thailand, Malaysia and Cambodia. The tariffs, announced Thursday by the Commerce Department, target manufacturers that Chinese companies used to bypass existing duties on Chinese-made solar gear. But the cost will be borne by America's allies, not Beijing, analysts said.

China's solar panel makers shifted production to Southeast Asia after the US first imposed tariffs on Chinese cells and modules in 2012. The new duties aim to close that loophole by applying anti-circumvention tariffs to the four countries. The rates range from 24% for Vietnam to 56% for Cambodia, with Thailand and Malaysia in between.

US importers of solar equipment will pay the tariff, not the Chinese parent companies, said Tim Brightbill, a trade lawyer who represents the American solar manufacturers that pushed for the tariffs. “The purpose is to stop the flood of Chinese-produced panels entering the US through these countries,” he said. “But the immediate effect is higher prices for US buyers.”

Solar installers in the US have already warned that tariffs will raise project costs and slow the transition to clean energy. The Solar Energy Industries Association said the new duties could add 10% to 15% to the cost of a typical utility-scale solar farm. That would make solar less competitive with natural gas and wind, the group said.

The tariffs cover about 80% of US solar module imports, according to data from the US Energy Information Administration. The four Southeast Asian countries supplied roughly 15 GW of modules last year, enough to power about 3 million homes. Replacing that supply is not easy, said David Gahl, a policy director at the Solar Energy Industries Association. “Domestic production is ramping, but it's not ready to meet demand,” he said. “We're going to see shortages and delays.”

China's solar exports are not directly affected because the US already has a separate 254% tariff on Chinese-made solar cells. The Chinese government responded by calling the tariffs “unfair” and said they would disrupt global solar supply chains. But Beijing has not retaliated with its own tariffs on US solar equipment, which is a net exporter to China.

The Commerce Department's decision is preliminary. A final ruling is expected in the first quarter of next year. The tariffs could be adjusted based on industry feedback. But Brightbill said the structure is unlikely to change. “The administration has made clear it wants to protect domestic manufacturers,” he said. “These tariffs are a tool for that.”

US solar manufacturing capacity has grown since 2022, when the Inflation Reduction Act offered tax credits for domestic production. First Solar, the largest US solar panel maker, announced plans to more than double its production capacity to 14 GW by 2025. But the company also warned that tariffs on imported equipment could raise its own costs, since it buys some components from Southeast Asia.

For traders, the key number is the 24% rate on Vietnam, the largest source among the four. That is lower than the 56% on Cambodia but still high enough to shift sourcing patterns, analysts said. US importers may try to shift orders to India or South Korea, which are not subject to the new tariffs. But those countries do not have enough capacity to replace the lost supply quickly.

A final ruling in the first quarter of next year will determine whether the tariffs stay in place. Until then, the solar industry faces uncertainty. The Solar Energy Industries Association said it will continue to argue that the tariffs hurt the broader US economy more than they help domestic manufacturers. “We support fair trade, but this is not the way to build a domestic industry,” Gahl said.