US solar tariffs can’t stop Chinese firms

Nov 06, 2024

For twelve years, the United States has waged a tariff war against a rising tide of Chinese solar imports. And for twelve years, Chinese manufacturers have found ways to sidestep the tariffs.

Their success lies in their ability to manufacture solar equipment cheaply and their willingness to shift production to non-tariff countries. Despite about half a dozen rounds of tariffs and a ban on goods made in China’s Xinjiang region over the course of three presidential administrations, Chinese companies have been able to use export bases across Southeast Asia to keep their products flowing into the United States.

Two decades ago, the United States accounted for 13% of global solar cell shipments, while China and Southeast Asian nations combined accounted for just 1%. Today, China accounts for 80% of global supply, while another 17% comes from Malaysia, Vietnam and Thailand – where Chinese solar firms have set up export hubs.

China’s share in global shipments rose from 1% in 2004 to 80% in 2023.

U.S. solar imports from those three countries plus Cambodia, another major export hub for Chinese firms, hit a record $12 billion in 2023, roughly four-fifths of all solar imports and four times 2019 levels. Shipments from China are now negligible.

The area chart depicts the market share of U.S. solar imports by country.

In 2012, in response to a complaint by a U.S. manufacturer, SolarWorld, the Obama administration set duties of roughly 36% on Chinese solar cells and panels. China’s share of U.S. solar imports, which had been over 50% the year before, dropped 23 percentage points.

The area chart depicts the market share of U.S. solar imports by country. The year 2012 is highlighted, with the text explaining that 33% of U.S. solar imports are from China.

China still supplied 38% of imported solar goods in 2014 after two years of tariffs. The U.S. stepped up duties on those products by 33% and set new tariffs on Taiwanese cells after some Chinese producers pivoted to source from there.

The area chart depicts the market share of U.S. solar imports by country. The year 2014 is highlighted, with the text explaining that 38% of U.S. solar imports are from China.

In 2018, President Donald Trump announced tariffs on all overseas-made cells and panels. Later that year, Chinese-made products received an additional 25% tariff. China's share of imports to the U.S. fell to less than 1%.

The area chart depicts the market share of U.S. solar imports by country. The year 2018 is highlighted, with the text explaining that 0.9% of U.S. solar imports are from China.

In 2022, the Biden administration extended the Trump-era solar tariffs on all solar imports and two years later increased the tariff on Chinese solar goods specifically. Some manufacturers in Thailand, Malaysia, Cambodia and Vietnam were also slapped with new duties for using factories in those nations to dodge tariffs on China. Goods from those countries now dominate solar panel supplies in the U.S. as China-made products have nearly vanished.

The area chart depicts the market share of U.S. solar imports by country. The year 2024 is highlighted, with the text explaining that 0.1% of U.S. solar imports between January and July 2024 are from China.

The area chart depicts the market share of U.S. solar imports by country.

Waves of tariffs imposed by the U.S. Department of Commerce were levied after solar companies in the United States brought multiple trade cases against their Chinese rivals, arguing they had lost billions in profit due to unfair subsidy policies by the Chinese government and the Southeast Asian nations used as export hubs. Chinese firms say they sell higher-quality products at lower prices.

However, by restricting the flow of solar panels, the tariffs also made the U.S. one of the world’s most lucrative markets. U.S. buyers pay some of the world’s highest prices.

The line chart shows the percentage difference in the price for mono-module solar panels sold in the U.S. vs. those sold in China between 2010 and 2024. Certain US tariff events have been annotated.

Trina Solar – the world’s 4th biggest solar manufacturer by shipments - was one of the first to set up a base in Southeast Asia with the opening of factories in Thailand in 2016 and in Vietnam a year later. In 2023, Trina said it had 19.5 gigawatts (GW) of solar cell, wafer and module manufacturing capacity in Southeast Asia, more than the manufacturing capacity in the United States last year.

As part of a petition for more tariffs, U.S. manufacturers said in April that there were 131 solar producers across Cambodia, Vietnam, Thailand and Malaysia and that much of the ramp-up in output from these countries was by Chinese-owned and headquartered companies.

Approximate location of factories opened by China's biggest solar firms - Tongwei, Longi, Trina, JA Solar and JinkoSolar - since 2012. Dates given either mark the opening of the factory or the launch of production.

New tariffs since 2023 on solar exports from those four Southeast nations have prompted more shifts in production. Already, there are early signs of new hubs in Indonesia and Laos. U.S. imports of solar goods from Indonesia nearly doubled to $246 million through August of this year, according to government data, while shipments from Laos, a more modest $48 million, were already seven times their 2023 total by August.

Setting up a factory in Southeast Asia is not that hard. A solar company can go from decision to production in four months for a module factory, according to Junsei Ryu, CEO of Japanese manufacturer Toyo Solar. Solar cells are more complex and take eight months, he said.

Chinese firms are also going outside Southeast Asia.

In Saudi Arabia, JinkoSolar joined hands with local partners in July to construct a 10 GW cell and module plant.

The United States is also in favor thanks to the incentives for domestic clean energy manufacturing in U.S. President Joe Biden’s 2022 climate change law, the Inflation Reduction Act. Chinese companies will have at least 20 GW worth of annual solar panel production capacity on U.S. soil by next year. If that continues, it could ultimately provide the supply to satisfy the U.S. and undercut the need to evade tariffs, according to Ryu.

That would represent a mixed victory for U.S. policy: made in America but in many cases owned by Chinese companies.

Sources

SPV Market Research; U.S. Census Bureau; PVinsights; corporate announcements and reports

Additional Reporting by

Colleen Howe

Photo by

Luisa Gonzalez

Edited by

Edwina Gibbs, Richard Valdmanis, Ella Koeze, Anand Katakam