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While President Donald Trumps sweeping tariffs on foreign imports have captured global headlines, antidumping and countervailing duty (AD/CVD) investigations into Southeast Asian products, along with a potential expansion of the Uyghur Forced Labor Prevention Act (UFLPA), could pose even greater risks to U.S. solar energy and energy storage. President Donald Trump wasted no time imposing tariffs on imports, one of his key campaign promises. In his first weeks in office, the president renewed the much-eroded Section 232 tariffs on steel and aluminum under the Trade Expansion Act of 1962. Trump also invoked the International Emergency Economic Powers Act (IEEPA) of 1977 to impose a new 20% tariff on goods from China, in addition to 25% tariffs on Canada and Mexico, albeit belatedly in the latter cases. Clean Energy Associates (CEA) doesnt expect the tariffs to have a significant impact on the solar or battery industries. Behind the levies, however, lurk more potent trade threats. The Section 232 tariffs announced by Trump include derivative products, a definition that encompasses solar trackers, aluminum frames, and likely other items. Purchasing these products from domestic producers will not necessarily protect solar and energy storage developers and engineering, procurement, and construction firms from the cost impact. As documented by Reuters and confirmed by CEA discussions with balancing system suppliers, domestic steel producers are raising prices in response to the tariffs. The IEEPA tariffs will increase prices for goods such as electrical transformers and switchgear, which are largely imported from Mexico. Over the medium term, the CEA expects the supply of transformers for the United States to shift to other low-cost locations. We expect that neither the Section 232 tariffs nor the IEEPA tariffs will, on their own, increase prices for photovoltaic systems or solar module bill of materials enough to have a significant impact on U.S. manufacturing or deployment. For battery energy storage systems (BESS), the market impact will likely be even less significant than for solar. Section 232 increases the costs of enclosures, racks, and containers for battery projects. Of these three elements, racks are of greatest concern. However, since racks only represent about 6% of the total cost of containerized BESS systems, we expect the impact to be relatively minor. The IEEPA tariffs will have an even smaller effect on BESS prices than the Section 232 levies, as the 20% tariffs on Chinese BESS will likely be simply absorbed by suppliers. The two tariffs combined will marginally hurt domestic cell manufacturers and integrators but will have little impact on battery deployment. Trump has promised to impose additional tariffs on automobiles and semiconductor materials. Although solar energy and batteries have not been mentioned, there is always the possibility that they will be included in subsequent proposals. AD/CVD alteration By far, the biggest threat to the solar and battery storage markets is not the presidential tariffs, but the AD/CVD investigations currently underway at the U.S. Department of Commerce. The imposition of provisional tariffs, as part of the AD/CVD case against Cambodia, Malaysia, Thailand, and Vietnam, has already been correlated with a significant reduction in PV module import volumes, threatening to turn oversupply in the US market into undersupply. The tariffs have also caused a geographic shift in supply chains. Cell production is shifting away from tariffed countries in favor of Indonesia and Laos, with promises of future factories in the Middle East also in the pipeline. Meanwhile, the current AD/CVD investigation into anode active materials (AAMs) could significantly disrupt the U.S. battery market. Plaintiffs are seeking duties ranging from 828% to 921%. While companies cooperating with the investigation are unlikely to receive such high tariffs, the CEAs analysis of AAM production inputs and Chinese AAM prices suggests that relevant data supports the case for triple-digit tariffs. Battery anodes and cells containing Chinese AAM are included in this case, and any duties on batteries also apply to packs and containerized systems. This therefore means potentially high duties on battery cells, packs, and containerized systems. It is important to remember that duties imposed under AD/CVD orders are not like other tariffs. AD/CVD duties are applied retroactively, are impossible to predict in advance, and change annually. As such, they create unique challenges for suppliers, importers, and buyers, and create a much greater market disruption than the numerical value of the duties might suggest. The UFLPA expands One of the biggest threats to the US solar and battery markets comes not from tariffs or duties. Its a law that specifically applies the legal prohibition on importing goods made with forced labor to products suspected of having inputs from Chinas Xinjiang region. Under the Uyghur Forced Labor Prevention Act ( UFLPA ), $3 billion worth of electronic products have been detained since June 2022. Based on CEAs discussions with suppliers and buyers, we believe that photovoltaic modules account for the vast majority of these detentions. In January 2025, the Forced Labor Enforcement Task Force (FLETF), which oversees the UFLPA strategy, added five Chinese ingot and wafer production companies to the UFLPA Entity List. This is the list of companies whose products cannot be imported, in whole or in part, into the United States. Previously, only Xinjiang-based manufacturers of metallurgical-grade silicon and polysilicon had been added to the Entity List, based on allegations of forced labor on-site. In the case of ingot and wafer manufacturers, their inclusion on the Entity List was not due to allegations of forced labor at their facilities. Rather, their inclusion on the list was due to their procurement of polysilicon potentially associated with forced labor. Its not difficult to see how this downward trend could expand during the Trump administration. The risk of further detentions of clean energy equipment and the addition of entities to the list is particularly acute given past statements made by Secretary of State Marco Rubio, who, in his new role, holds a position on the FLETF. As a senator, Rubio repeatedly joined other members of Congress in urging FLETF to expand the entity list and take other steps to further restrict imports that may contain Xinjiang content. “It is our view that implementing the UFLPA requires a robust entity list that can serve as a useful guide for importers and CBP [U.S. Customs and Border Protection] operations,” read a statement signed by Rubio and three other members of Congress in April 2023. “Numerous civil society groups have compiled data on many entities linked to the XUAR [Xinjiang Uyghur Autonomous Region] and forced labor that are not currently included on the Forced Labor Enforcement Task Force (FLETF) list.” In June 2024, Rubio and four other members of Congress sent a letter to FLETF requesting that major Chinese battery manufacturers CATL and Gotion be added to the Entity List. Compound risk The current and potential impact of U.S. tariffs and duties, and the threat of UFPLA action, pose a substantial risk to buyers, importers, and suppliers in the solar and battery industries. This does not include the risk that the investment and production tax credits enjoyed by these industries could be subject to early expiration, new requirements, or repeal. Furthermore, uncertainty surrounding tariff levels and the rapid pace of political change create a challenging environment for clean energy investment, particularly for capital-intensive projects, such as manufacturing plants, that will take years to realize their potential. Monitoring policy changes at a granular level is essential for any company considering short-term investments. Over time, the risks facing the solar and BESS sectors will dissipate, and the clean energy industry will find a new equilibrium. The timescales of various processes, including budget reconciliation, mean that it may take months or even more than a year before policy changes are finalized. In the meantime, all industry participants should seek out reliable sources of information and analysis and follow them diligently. |
