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[SINGAPORE] The US has slapped tariffs as high as 3,500 per cent on South-east Asian solar exports, delivering a major blow to the region’s role as a manufacturing hub – chiefly for Chinese solar giants – and escalating the Biden-era clean energy trade war under US President Donald Trump.

The four affected markets – Cambodia, Malaysia, Thailand and Vietnam – had accounted for nearly 80 per cent of US solar imports before a two-year tariff waiver expired in June 2024.

The new tariffs are expected to slow the expansion of South-east Asia’s solar manufacturing sector, potentially pushing investors to redirect capital to other regions such as Europe, India or the Middle East, said Sharad Somani, partner and head of infrastructure at KPMG Asia Pacific.

Still, some experts see a silver lining – closer China-Asean ties and a glut of solar panel supply could ultimately lower costs for regional projects and help accelerate South-east Asia’s low-carbon transition, said Ong Shu Yi, environmental, social and governance research analyst at OCBC.

“South-east Asia could experience indirect upside, as the region’s huge untapped solar resource can leverage potentially excess manufacturing capacity at competitive rates locally,” said Somani.

The US finalised duties on solar imports from Cambodia, Malaysia, Vietnam and Thailand late on Monday (Apr 21), five months after a preliminary decision was made by the previous administration under then-president Joe Biden following complaints from US manufacturers that Asean solar exporters were flooding the market with cheap products.

The rates unveiled were broadly higher than the preliminary duties announced in November last year, probably a reflection of the US’ hardened stance on perceptions of “unfair trade” after Trump took over as president.

Given that US demand for Asean solar imports will most likely decline, solar manufacturers will have to seek alternative markets for buyers.

Manufacturers in this region are not as cost-effective as those based in China, and may not be as attractive as an export market for solar cells and panels, said Professor Johan Sulaeman, who teaches finance at the National University of Singapore’s Business School.

Relocating their facilities to other markets that are currently not subject to these duties would be a likely consideration.

High US tariffs after the waiver expired had already pushed several Chinese-owned solar manufacturers to shut down or scale back operations in Malaysia, Thailand and Vietnam, or shift their operations to Indonesia and Laos, which are currently not subject to these tariffs.

However, observers noted that this is not a long-term solution as trade barriers may still arise for these markets if high US tariffs are implemented in the future.

“The imposition of these tariffs challenges Asean’s position as a key solar manufacturing hub, targeted to the US market. The region’s attractiveness as the preferred location for Chinese-owned solar manufacturers will decline, potentially leading to a decline in the region’s prominence in the global solar supply chain,” said Prof Sulaeman.

As Asean’s potential as a competitive solar manufacturing hub will largely hinge on the stability and predictability of global trade, the outlook for long-term investments in solar manufacturing may remain cautious, said Sanjeev Gupta, oil and gas leader for EY-Parthenon, the strategic consulting arm of professional services firm EY.

Besides the latest duties on solar imports, Trump imposed reciprocal tariffs on imports from about 90 nations just three weeks ago, roiling financial markets and raising global uncertainty. These four South-east Asian markets are currently subject to the blanket tariff rate of 10 per cent, which could go up if he decides not to extend the three-month moratorium.

Where does Singapore stand?

While Singapore is not among the four South-east Asian markets facing higher duties, the latest tariff volley could potentially complicate the country’s ambition of importing 6 gigawatts (GW) of low-carbon electricity from its neighbours by 2035.

The renewable-energy-starved city-state has already inked contracts with several developers around the region to import up to 5.6 GW of green electrons.

Some of these projects might feel the impact of the new duties, though it would depend on whether the developers feel they need to change the nature of their businesses fundamentally because of the tariffs, said Dr David Broadstock, senior research fellow at the National University of Singapore’s Energy Studies Institute.

Still, he expects most renewable companies involved in Singapore-linked projects to carry on with business as usual.

Somani reckoned Singapore may actually benefit, given the excess solar capacity in the region currently.

“However, the US tariff could disrupt the overall supply chain, as the released capacity may not be fully absorbed by alternative markets in the short term. This could lead to a wave of consolidations and capacity rationing within the sector to mitigate the impact of these tariffs,” he added.

Amid concerns that the US tariffs could ripple through regional solar supply chains and affect clean energy players based in Singapore, The Business Times reached out to Sembcorp – one of the country’s largest renewable energy developers.

In response to queries, a Sembcorp spokesperson said that the new duties do not have a direct impact on its solar operations in Singapore. In addition, the company’s operations are predominantly in Asia, and it does not have direct exposure to the US.

Additional reporting by Mia Pei