What impact will Trump's victory have on China's photovoltaic industry

From early 2023, Chinese solar companies began establishing production facilities in the U.S. By the end of the year, major industry players such as Longi, JA Solar, Trina, Jinko, and Canadian Solar had made significant strides in setting up production lines in America, with some factories already operational.

On November 6, 2024, Donald Trump won the U.S. presidential election. Many in the industry are concerned that his return to office could lead to actions like repealing the IRA Act, which may impact the growth of China’s renewable energy sector.That same evening, Trina Solar announced a major decision: the sale of its 5GW module plant in Wilmer, Texas, to the U.S.-listed company FREYR (NYSE: FREY). In addition to cash, the deal includes equity in FREYR. This transaction will allow Trina to secure a long-term position in the U.S. market by localizing its production capacity. This move marks a first in the solar industry and underscores Trina’s commitment to expanding local manufacturing and operational capabilities in overseas markets.

Trump’s re-election adds new uncertainties and challenges for Chinese solar companies operating in the U.S.

Increased policy risks

Trump has stated that, if he returns to the White House, he would repeal the IRA Act on his first day in office. Removing the IRA would create significant challenges for Chinese solar companies expanding in the U.S., as this policy currently provides essential clean energy subsidies that benefit these firms investing in American facilities. Without the IRA, they would face increased production costs and heightened market risks.

However, market analysts remain cautiously optimistic. Guolian Securities notes that the Republican Party is divided on the IRA, and Trump's own diverse energy-sector backers make a full repeal unlikely. Orient Securities also suggests that while Trump may attempt to alter the IRA, achieving such changes would require strong alignment in both houses of Congress, adding complexity to any policy shifts. Even so, the uncertainty around Trump’s potential policy changes remains a significant risk for Chinese solar companies in the U.S.

Trade barriers and tariffs

During his campaign, Trump repeatedly emphasized trade protectionism against China, signaling that if elected, he may impose higher tariffs and trade barriers on Chinese solar firms. He suggested a potential 10% tariff hike for all U.S. trade partners, with tariffs on Chinese imports reaching up to 60%.

However, it’s worth noting that direct exports of Chinese solar products to the U.S. are minimal. In the first nine months of this year, Chinese exports of solar cells and modules to the U.S. only made up 0.5% and 0.3% of total exports, respectively. This means that while increased tariffs could raise production costs and local prices in the U.S., the direct impact on Chinese solar exports may be limited. Yet, these higher costs could impact the competitiveness of Chinese solar firms in the U.S. market. Additionally, Trump might employ other trade actions, such as anti-dumping and countervailing measures, to put further pressure on Chinese solar companies.

Challenges and opportunities coexist

Despite the challenges, the U.S. market remains highly attractive for Chinese solar companies. As the second-largest global solar market, the U.S. saw solar power account for 59% of new electricity generation in the first half of the year, setting the stage for a record-breaking year. The strong demand, high profitability, and high entry barriers make it an ideal market for expansion. By setting up manufacturing plants in the U.S., Chinese companies can better meet local demand, enhance brand influence, and benefit from policy subsidies.

However, the uncertainty of Trump's potential re-election could affect market demand. If protectionist policies are implemented, restricting Chinese solar products, it may pose challenges for Chinese companies. Still, the U.S. remains dependent on imports due to a lack of domestic solar capacity and critical shortages in the upstream supply chain, giving Chinese firms a competitive advantage in the market.

Technological progress and industrial upgrading

To tackle the challenges and uncertainties arising from Trump's potential re-election, Chinese solar companies must focus on technological advancements and industry upgrades. By innovating and enhancing product performance, quality, and cost-efficiency, they can strengthen their market competitiveness. In recent years, Chinese companies have made significant progress in R&D, such as developing copper plating and silver-free metallization, which reduce production costs and improve module performance. These innovations will provide strong support for Chinese solar firms in the U.S. market.

Additionally, Chinese solar companies should enhance international collaboration, stay informed on global market trends, and actively participate in setting international standards and regulations to increase their global influence. However, as Trump’s inauguration is still months away, the situation remains uncertain. Whether he will offer China a "New Year’s gift" remains to be seen, and we can only wait and watch.