As US plugs Asean trade loophole, China’s solar panel makers face dilemma

The US has taken several measures against Chinese solar panel manufacturers in Southeast Asia to address tariff circumvention. In May, the US Department of Commerce opened anti-dumping and anti-subsidy investigations into crystalline silicon photovoltaic cells from Cambodia, Malaysia, Thailand, and Vietnam. This move came after domestic solar companies alleged that China had been trying to circumvent tariffs by shifting manufacturing to these Southeast Asian nations.

Additionally, the US has raised import tariffs on China and Southeast Asia as plummeting global solar prices have hurt US factory expansion plans3. The Commerce probe found that units of Chinese companies BYD, Trina Solar, Vina Solar, and Canadian Solar were dodging US tariffs on Chinese solar6.

Moreover, the US Senate voted to reinstate tariffs on solar panels from Chinese companies in Southeast Asia that had been found to be coming into the United States in violation of trade rules2.

These actions by the US aim to protect domestic solar manufacturers and ensure that Chinese firms do not bypass tariffs by relocating their production to other countries in the region.

The shifting of manufacturing bases to Southeast Asia by Chinese companies has had a significant impact on the US's domestic solar industry and supply chains. This shift was initially driven by the imposition of tariffs on Chinese goods by the US, which made it economically unviable for Chinese companies to export solar products directly to the US. As a result, many Chinese solar panel manufacturers relocated their production bases to countries like Malaysia, Vietnam, Thailand, and Cambodia, where they could bypass the tariffs and maintain their cost advantages.

However, this relocation has not gone unnoticed by the US. In May, the US Department of Commerce opened anti-dumping and anti-subsidy investigations into crystalline silicon photovoltaic cells from the aforementioned Southeast Asian nations, alleging that China has been trying to circumvent tariffs by shifting manufacturing to these countries. This has led to a great deal of uncertainty for Chinese solar panel manufacturers in Southeast Asia, with many considering whether to stay or leave the region.

The potential fallout from these investigations could have significant implications for the US's domestic solar industry and supply chains. If the US continues to take steps to protect its domestic solar industry by blocking Chinese manufacturers from circumventing tariffs through production in Southeast Asia, it could lead to a reduction in the supply of low-cost solar panels in the US market. This, in turn, could slow the growth of the US solar industry, as higher costs for solar panels could deter consumers and businesses from investing in solar energy.

On the other hand, the US's moves to protect its domestic solar industry could also create opportunities for American solar panel manufacturers. If tariffs are successfully applied to Chinese solar products manufactured in Southeast Asia, it could level the playing field for US manufacturers, allowing them to compete more effectively with Chinese firms. This could lead to increased investment in the US solar manufacturing sector, potentially creating jobs and boosting the industry's growth in the long run.

In summary, the shifting of manufacturing bases to Southeast Asia by Chinese companies has disrupted the US's domestic solar industry and supply chains. While the outcome of the current investigations is uncertain, it is clear that the situation could have significant implications for the future of the US solar industry.