Trump tariffs: India may have competitive edge over China, Vietnam in solar equipment exports to US

New Delhi: Indian solar equipment makers may have a competitive advantage over their rivals in China and Vietnam after US President Donald Trump announced his promised reciprocal trade tariffs on almost all countries.

Although the tariffs will increase costs for US power generators that import solar equipment and may impact the sales of exporters, India may have an edge due to the lower tariff imposed on Indian products.

The US imposed a 27% additional tariff on Indian exports, while the tariffs on China and Vietnam are 34% and 46%, respectively. The current tariff rate on Indian solar exports stands at 14%.

While the details are yet to be outlined for the tariffs imposed by the US, the initial analysis seems to show a comparatively better situation for Indian solar manufacturers than other global suppliers, Ashwani Sehgal, president of the Indian Solar Manufacturers Association, told Mint.

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"It seems that as the tariff imposed on Indian products is lower than that imposed on China and Vietnam, the major suppliers of modules and cells. India seems to have an edge over its counterparts. This is just the initial assessment and the details, which would be released on 9 April, would give a better picture of the likely impact," Sehgal said.

India exported $1.96 billion worth of solar modules in FY24, with $1.93 billion—almost its entire export volume—going to the US. China remains the global leader, with total module exports valued at $49 billion in 2023, dwarfing India’s export figures.

More expensive

The tariffs, however, would make Indian supplies much more expensive than solar equipment produced in the US. The imposition of tariffs on Indian solar modules could significantly impact the industry, the Council on Energy, Environment and Water (CEEW) noted in a report in February.

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"The export market for Indian solar manufacturers could shrink dramatically due to price disadvantages. For instance, Indian manufacturers are currently selling TOPCon solar modules (manufactured with imported cells) to the US at around USD 0.30 per Watt-peak (Wp), compared to USD 0.17-0.19 per Wp domestically," it said, adding that the tariffs would further inflate these prices in the US market, worsening the disadvantage.

Data from CEEW showed that India’s solar module exports accounted for 4.7% of US solar imports in Q1 of 2024, compared with 87% for Southeast Asian countries, where many factories are Chinese owned. While US anti-dumping duties on these imports (up to 271 per cent) create an opportunity for Indian manufacturers, the new reciprocal tariff could erode their competitiveness.

Indian companies including Waaree Energies have local manufacturing capacity.

In February, Mint reported that India is pursuing direct government-to-government engagements with African and West Asian nations to open new markets for Indian green energy companies and solar equipment manufacturers, beyond the US.

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India's current solar module manufacturing capacity stands at 74 GW, while that for solar cells is 9 GW.