How US Import Barrier On Chinese Solar Cells Can Change Trade Game?

How US Import Barrier On Chinese Solar Cells Can Change Trade Game?

The recent trade barriers imposed by the United States (US) against the imports of Chinese solar equipment like solar cells has triggered speculations on the overall global trades of clean energy equipment. The Joe Biden led government recently triggered a new controversy by increasing the imports tariffs for solar cells for upto 50 percent and increased its tariffs for imports of Electric Vehicles (EVs) by upto 100 percent.

The move seen globally as a ‘protectionist’ policy to safeguard the domestic solar module manufacturers and boost their capacities is likely to change the whole trade route for China which had found the US a profitable market for solar exports. The import duties against Chinese imports are not something new. The Indian government too had earlier imposed a Basic Customs Duty (BCD) of 25 percent against the import of solar cells, (and 40% on modules)  which was paramount for the Indian solar module makers as they lacked the solar cell manufacturing capacities and technologies and the required machineries. However, later the Chinese counterparts started dumping solar modules and cells through other trade routes from Southeast Asian countries like Malaysia and Vietnam and others.

Something similar seems to be anticipated in the case of Chinese-US trade tensions too. The Chinese players have also approached to the World Trade Oraganization (WTO) against the allegedly unfair trade rules. After pressure from the local trade associations, the US government assured lifting some curbs against the higher tariffs on the import of some solar module manufacturing equipment that was needed to produce solar modules inside the country. 

IEA’s 2024 report on global solar module manufacturing plans.

US Lens On Southeast Asian trade route 

Sensing a likely misuse of intrusion of Chinese solar cell and module imports from other trade routes, the US Department of Commerce recently initiated a countervailing duty investigation of whether silicon photovoltaics are assembled into modules from Malaysia or not.

According to reports shared by the department, the investigation found that solar cells were sent to these countries from China. These countries in Southeast Asia included Cambodia, Malaysia, Thailand, and Vietnam. Solar cells were made in Cambodia, Malaysia, Thailand, or Vietnam which were used to send Chinese solar wafers and solar cells. Then these solar cells were supposedly sent to another non-inquiry country (Cambodia, Malaysia, Thailand, or Vietnam) for assembly into a solar module with three or more Chinese components, and the solar module was then exported to the United States.

This point of origin (POI) reported in the study indicated that more than two of the following components in the solar modules were produced in China. These components include silver paste, aluminum frames, glass, back sheets, ethylene vinyl acetate sheets, and junction boxes. The report found that the solar cells that claimed being produced using non–Chinese wafers in Malaysia were produced in Malaysia from wafers produced in China.

However, with the recent trade barriers especially in the solar cell imports, the scale of solar module manufacturing in US is likely to be a Herculean Task as the industry in the US is still struggling to grow without a robust backward supply chain. It is ironic that while the US has ample silicon sand which is often exported to China which is later used to make Silicon crystalline solar modules. The very first solar cell was also manufactured in the US.

China–Leading the chart

However, with time, China grew exponentially with its large-scale solar manufacturing plants with advanced machineries, automated working which enabled it to create economies of scale. As per estimates, in the solar module sector, China alone supplies 80 percent of global solar modules. Some of the companies like LONGi, Jinko Solar has solar capacities even higher than the total solar capacities on many countries. 

IEA’s 2024 report on advancing clean technology manufacturing. Source: IEA

In the US, there are selected companies like FirstSolar and others which are trying to create its own niche in the domestic solar module manufacturing. However even in the US, Chinese solar firms like Jinko Solar has its own solar module manufacturing plants. Indian companies like Waaree and Vikram Solar have also planned to setup up their own solar module manufacturing plant. US is also one of the most sought after export destinations for Indian solar cell and solar module manufacturers which offers them better prices than India. Several Southeast Asian countries have also targeted US for the supply of solar modules,

(With inputs from Manish Kumar)