Text: Huaxia Energy Network

On April 8 (EST), White House press secretary Levitt announced at a White House press conference that starting at 00:01 a.m. on April 9 (12:01 p.m. Beijing time on April 9), the United States will impose an additional 50% tariff on all Chinese imports.

Combined with the 20% and 34% tariffs that have already been in effect, the U.S. tariffs on China have reached an unprecedented 104%. This means that the door to normal trade between China and the United States will be substantially closed.

The Trump administration in the United States has frantically wielded the "tariff stick", which has brought great damage to the world trade order, and the process of globalization will seriously regress.

Chinese PV companies are no strangers to bullying in the United States. China's photovoltaics, which rely on exports for more than half of its products, will once again undergo a severe test, second only to the "double reversal" of Europe and the United States more than ten years ago.

The stock market is the most direct reflection of the lethality of the US tax hike. On April 7, more than 60% of the 105 listed photovoltaic companies directly fell or touched the edge of the limit, and the market value evaporated by more than 210 billion yuan throughout the day. According to the Wind PV Index, the PV index set a new record for the plunge of PV stocks this year with a decline of 207.38 indexes and 11.96% on the same day.

After the "double anti-dumping" storm, China's PV shifted part of its production capacity to Southeast Asia and went to sea through the channel. Now, this road has also been completely blocked, and the United States has imposed high tariffs of 24%-49% on Southeast Asian countries, making it impossible to build factories in Southeast Asia.

In the face of wave after wave of encirclement and interception by the United States, where should China's photovoltaic go? Is there any point in building a factory in the United States?

China's PV is completely blocked from the US market

According to the "US Solar Market Insights 2024 Review" report jointly released by the Solar Energy Industry Association (SEIA) and Wood Mackenzie, the US will add 50GW of new solar capacity in 2024, a year-on-year increase of 21% over 2023. It is estimated that in the next ten years, the average annual new installed capacity in the US market is expected to reach 45GW.

In addition, the U.S. PV market has maintained good premiums and profits. According to data from LONGi Green Energy (SH:601012), in the past two years, module prices in the US have been about three times higher than those in other regions.

From the above two points, it can be seen that the United States is a good photovoltaic market, and it is an ideal place for Chinese photovoltaic to go to Haitian. Now, under the indiscriminate tariff attack of the United States on a global scale, China's PV is facing the strictest blockade.

First of all, it is the blockade of China's direct photovoltaic exports.

The 104% tariff imposed by the United States on Chinese goods is not all that photovoltaic products are exported to the United States. For China's photovoltaics, the U.S. government is "caring" and has raised taxes many times before. In 2012, anti-dumping and countervailing duties were first imposed, and after 2018, Section 201 and Section 301 investigations were launched.

In 2024, the U.S. will impose a 14.25% "Section 201 tariff" on PV modules imported from China, which expires on February 6, 2026. On May 14, 2024, the United States will increase the Section 301 tariffs on crystalline silicon photovoltaic cells and modules exported directly from China from 25% to 50%; From January 1, 2025, the U.S. will also increase tariffs on solar wafers and polysilicon imports from China to 50%.

Under the accumulation of these tariffs, it makes no sense for Chinese mainland PV products to be exported directly to the United States. "Due to various trade policy restrictions, the PV capacity that can be exported directly from China to the United States in the past few years has been almost zero." Zhong Baoshen, chairman of LONGi, previously said. In fact, this also means that how high the US tariffs will be raised this time and in the future will have no impact on China's domestic PV exports.

Let's look at the blockade of China's PV capacity in Southeast Asia.

On May 15 last year, the U.S. Department of Commerce announced the launch of a double dumping investigation into photovoltaic products in Cambodia, Malaysia, Thailand and Vietnam, and the suspected dumping margins were preliminarily determined to be 125%, 81%, 70% and 271% respectively. This will block the production capacity of Chinese photovoltaic companies in these four countries, and it will become impossible to re-export to the United States.

In response, some Chinese PV companies have chosen to move from four Southeast Asian countries to Laos and Indonesia to build production capacity. Today, this small gap has also been blocked.

The United States raised taxes this time, and the four Southeast Asian countries Vietnam, Thailand, Malaysia, and Cambodia were levied high tariffs of 46%, 36%, 24%, and 49% respectively. Laos and Indonesia, which were once "safe havens" for building factories in Southeast Asia, were also subject to tariffs of 48% and 32% respectively.

In addition, India, South Korea, and Japan were also levied 26%, 25%, and 24% respectively, and Taiwan, China, was also levied with 32% tariffs; Other regions, such as South Africa, were levied 30 percent, and even the European Union, a staunch ally of the United States, had a 20 percent increase in tariffs. Under the new tariff policy, the way for Chinese photovoltaic companies to build factories in third-party countries and export to the United States has been completely blocked.

Nowadays, if Chinese PV wants to export to the United States, it can only choose a place with a slightly lower tax rate. For example, Indonesia (32%), Malaysia (24%) and the Philippines (17%) have slightly lower combined tax rates in Southeast Asia, and these countries are likely to become the largest PV export markets to the United States. Trina Solar's (SH:688599) April 7 response on the interactive platform echoed the above view, "The company's Indonesian joint venture TOPCon cell module plant is not affected by the "double reversal" of the four Southeast Asian countries, and the Indonesian tax rate is relatively low in the proposed new tax rate announced this time, and the Indonesian plant has a relatively competitive advantage." ”

However, some brokerages said that manufacturers in Southeast Asia benefit from the proximity to China's PV supply chain and investment, and integrated PV factories can more quickly reduce costs and upgrade new cell technologies, thereby offsetting higher tariffs. "Southeast Asian factories are expected to be more resilient than they were before Trump imposed retaliatory tariffs." Bloomberg New Energy Finance said.

Lv Jinbiao, co-secretary general of the China Photovoltaic Standardization Committee of the International Semiconductor Industry Association (SEMI), told Huaxia Energy Network that the previous direct double reverse tax rate of the United States on the four Southeast Asian countries plus the new tariffs this time, the total tax rate is about 50%-60%.

"Based on the export price of 0.8 yuan/W, the sales price of Southeast Asian modules in the US market has reached 1.2-1.28 yuan/W, which is still competitive compared with domestic integrated modules in the United States. As a result, U.S. PV plant investors will pay for higher tax rates, and U.S. installations will fall less than expected this year. Lu Jinbiao said.

The value of "building a factory in the United States" needs to be revalued

As of the first half of 2023, 8 Chinese PV companies have built factories in the United States, with an overall planned production capacity of more than 16GW (see a previous report by Huaxia Energy Network: "China's Photovoltaic Going Overseas 2.0 Era: The Temptations and Traps Behind the Heat of Building Factories in the United States").

Now, under Trump's punch, Chinese PV companies need to reassess the value of building factories in the United States.

Trump supports traditional energy sources such as oil and gas, coal, and has slammed the Democrats' policies to combat climate change, and has pledged to repeal the Inflation Reduction Act (IRA) signed by his predecessor, Joe Biden. After Trump was elected president of the United States in November last year, the enthusiasm of Chinese photovoltaic companies to build factories in the United States quickly cooled down and cooled - under the high labor costs of the United States, if they leave the IRA subsidies, they will inevitably face the risk of losing money.

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PRIME EXAMPLE OF THIS IS THAT ON THE EVENING OF TRUMP'S ELECTION VICTORY ON NOVEMBER 6 LAST YEAR, TRINA SOLAR ANNOUNCED THAT IT WOULD SELL ITS 5GW MODULE PLANT IN WILMER, TEXAS, TO FREYR (NYSE: FREY), A PUBLICLY TRADED U.S. COMPANY, AND TRINA SOLAR WOULD RECEIVE A STAKE IN FREY AND SOME CASH.

In addition, it is reported that the Trump administration is currently formulating a policy on "keeping an eye on foreign entities", which is intended to restrict Chinese capital companies from setting up factories in the United States under the benefit of IRA. If this regulation is introduced, it may significantly discourage Chinese companies from building factories in the United States.

However, there is also a view that in the context of a large-scale tariff growth policy, PV companies with domestic production capacity in the United States may be more competitive. This mainly refers to companies that have already landed production capacity in the United States, and it is too late to build new production capacity now.

Some brokerages said that the reciprocal tariff is in line with the U.S. strategy of supporting local new energy manufacturing. In the long run, the reciprocal tariff measures are in line with the U.S. strategy of supporting local new energy manufacturing, and may promote the investment and development of the U.S. photovoltaic manufacturing industry.

In addition, the United States has exempted Canada and Mexico this time. At the same time, only 10% tariffs will be imposed on the United Kingdom, Australia, Turkey, Saudi Arabia, Brazil and many other Middle Eastern and South American countries. Before the generally raised tariff threshold, those tax increase depressions may also mean opportunities to build factories.

Some experts interpret this as saying that the USMCA trade agreement shows that the United States is still relatively tolerant of its neighbors, and has little impact on companies that transfer production capacity to Mexico. Oman, Saudi Arabia, Mexico and other places are subject to 10% tariffs, which is good for enterprises building factories in the Middle East and Mexico.

"As a result of the new tariffs, manufacturers of solar products may leave Southeast Asia and move to other countries with relatively low production costs and tariffs, such as the Middle East." Bloomberg New Energy Finance believes.

Strategies and future enlightenment for PV companies

After the tax increase, a number of major photovoltaic manufacturers that have built factories in the United States have responded, explaining the possible impact and short-term countermeasures.

On April 7, Trina Solar said on its interactive platform that the company has a sufficient scale of battery module inventory in the United States so far, and its cost is not expected to be affected by the reciprocal tariffs imposed by the United States. In addition, some products that are about to enter customs in transit, plus some other supply channels, can meet the needs of the company's customers in the U.S. market in the later stages of this year.

"This reciprocal tariff may bring about a certain increase in product prices, which will have a positive impact on the profit of battery module inventory in the United States." Trina Solar represents. JA Solar Technology (SZ:002459) also recently said that the layout of the company in the United States is diversified. In addition to negotiating with customers in advance on potential tariff allocations, targeting cells from non-Southeast Asian countries and putting into production 2GW of module production capacity in the US, 6GW of cell and 3GW module projects in Oman are expected to be completed within the year. Oman's reciprocal tariff is only 10%, with obvious tax advantages, and is expected to gradually become the main way to ship to the United States.

"The U.S. market is attractive, but it has complex geopolitical implications." LONGi Green Energy also said that its 5GW PV module factory in Ohio, a joint venture with US energy giant Invenergy, mainly produces PERC modules, with both production and sales booming. In the long term, BC technology needs to be gradually introduced to remain competitive. However, in the future, "whether the company is deployed in the United States, how much resources to invest, and how much production capacity to establish still need to be carefully evaluated."

In addition, some photovoltaic companies that have not developed business in the United States have also explained. For example, Aiko Co., Ltd. answered investors' questions and said that at present, the company's ABC cell and module business, PERC and TOPCon cell business are not directly sold to the U.S. market, and the current overseas sales areas are mainly Europe, Asia-Pacific, and countries along the Belt and Road. U.S. global tariff policy has no direct impact on the company's business.

In the face of the frequently changing US tariff policy, how should the PV industry respond next?

Lv Jinbiao believes that it is unrealistic to pick a tax depression to transfer production capacity, "China's photovoltaic industry has lost money for more than a year, in fact, it is no longer able to reinvest in the transfer of production capacity." He believes that the struggle strategy is one thing, the industrial competitiveness is the foundation, and the fighting spirit stimulated under the extreme pressure is more important.

"With the invincible competitiveness of China's photovoltaic products, no matter how much taxes are added, American consumers will pay, and China's photovoltaic products must be confident. At present, the most important thing is to maintain the industry's determination, unite with the outside world, not to roll up in the loss-making market, and not to fight price wars. Lv Jinbiao told Huaxia Energy Network.

Some professionals also said that the so-called tariff asymmetry of the US government is directly calculated by deficit/imports, such a rough algorithm, without rigorous evaluation, and finally in the process of real landing, I believe that there will also be many problems, hitting the south wall or possible to correct the deviation, Chinese photovoltaic companies do not need to be in a hurry, wait for the situation to be clear before making a decision.

Indeed, no matter how the U.S. tariffs ultimately take place, it will be a devastating reconfiguration of the global trade order. For Chinese PV companies, it is a long-term solution to diversify their global layout to avoid repeating the mistakes of the four Southeast Asian countries, and at the same time to open up a more diversified market to reduce their dependence on the US market.

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