US sanctions against China to benefit Indian solar exports

The US decision to impose high tariffs on imported solar cells, EVs, batteries and critical minerals from China will come into force from September 27 and open up big export opportunities for Indian manufacturers of many products, mainly solar equipment.

The Office of the US Trade Representative (USTR) of the US Department of Commerce has announced that Chinese-made electric vehicles would attract 100% import duty, on solar cells 50% and 25% on EV batteries, critical minerals, aluminium and steel. Polysilicon, used in solar panel manufacturing, will attract a 50% import duty from 2025. However, the USTR has given tariff exceptions to import solar and wafer-making machinery. On September 13, the USTR announced final modifications concerning the statutory review of the tariff actions against China.

The US move is to protect domestic industries and dumping by China as the US is planning to invest $370 billion in clean energy programmes under the recently introduced Inflation Reduction Act (IRA). China makes 70% of EVs and has over 90% capacity of solar modules, wafers and polysilicon in the world.

After the US started imposing restrictions a few years ago, many Chinese companies relocated production to neighbouring countries. In June 2022, the US imposed anti-dumping duties and anti-circumvention duties on imports from countries like Cambodia, Malaysia, Thailand, and Vietnam. However, the US Department of Commerce allowed 24 months of duty-free access till June 2024 for solar cells and modules from these countries to ensure supplies and projects were not affected.  The US imported $12.5 billion worth of solar products, mostly dumped at about half the prices from the South East nations, say sources.  

India's solar exports rose 227% to $1.8 billion in 2023 from $561 million in 2022 and the US accounted for over 97% of Indian exports. The rest were from Indonesia and a couple of African countries.

 India's total solar module manufacturing capacity reached 64.5 gigawatts (GW) and that of cell manufacturing capacity reached 5.8 GW as of December 2023. India's module manufacturing capacity is expected to exceed 150 GW and cell capacity to reach over 75 GW by 2026.