ASEAN, explained.
Assembling cell modules at a factory in Phnom Penh, Cambodia (Taylor Weidman/Bloomberg via Getty Images)
US tariffs are testing whether ASEAN is all talk on regional integration for renewable energy generation.
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The sun is setting on Southeast Asia’s solar exportersThe sun is setting on Southeast Asia’s solar exporters
Southeast Asia’s solar panel manufacturers are facing hard times. Having benefited from anti-China trade measures, Southeast Asia had become the largest source of US solar photovoltaic (PV) imports – until Washington turned on the region. Once bright solar ambitions are beginning to set. Southeast Asia needs to find answers closer to home.
The United States has persistently raised trade barriers to solar panels for more than a decade but the key factor driving import flows has been the tariff differential between countries. As president, Barack Obama imposed solar panel duties on China, and Donald Trump imposed general goods tariffs during his first term.
This gave Chinese firms an incentive to set up manufacturing operations in Southeast Asia. Vietnam, Thailand, and more recently Cambodia were the prime beneficiaries. This added to significant solar PV manufacturing in Malayia. Solar exports to the United States surged from US$2.8 billion in 2012 to US$14.4 billion by 2023. By 2024, 80% of US solar PV imports came from these four countries.
However, dependency cuts both ways. The United States represented the same share of Southeast Asia’s total solar exports, leaving the industry vulnerable.
ASEAN has trumpeted deepening regional economic integration as a response to tariffs. Solar would be a good place to start.
Viewed as an extension of Chinese overcapacity, Joe Biden effectively ended Southeast Asia’s access to the US market in 2024 by imposing anti-dumping and countervailing duties. Trump announced even higher import duties in April of this year. Now the average effective rate for Malaysia is roughly 34%, while the determination on Vietnam and Thailand is well over 300%, and Cambodia is hit hardest with 652%. Firm specific as well as general rates for each country’s industry were imposed, meaning rates reached as high as 3,400% for some firms. These will translate into countervailing duties (effectively tariffs) alongside additional anti-dumping duties ranging from 2% to 271%.
The industry has already started showing signs of stress. More job losses and factory closures are expected. Even Malaysia’s solar manufacturers are struggling despite receiving the lowest tariff rates.
Much of the region’s manufacturing capacity is underpinned by Chinese investment, inputs, and technology. China accounted for more than 80% of foreign investment into new projects. This reflects China’s dominance in global solar PV and global supply chains.
But for the countries in Southeast Asia, China’s omnipotence in their solar PV industry is exaggerated. The United States Uyghur Forced Labour Prevention Act and other measures were used to prevent polysilicon (the upstream material needed to manufacture solar cells) from China’s Xinjiang region being used in US-deployed solar due to human rights concerns. Malaysia developed and expanded domestic polysilicon production while Vietnam began importing polysilicon from Germany, the United States, and Malaysia.
In response to Biden-era tariffs, Indonesia and Laos became the next best locations to export from. Indonesia brought online 20 gigawatts of foreign-owned solar manufacturing capacity, up from just 1 gigawatt at the end of 2022. China led the way with manufacturing investments in these countries, to be sure. But US investments in Indonesia since 2023 are about one-third the value as those from China, and in Laos, the figure is approximately half. This shows Southeast Asia’s solar developments are not solely dictated by Beijing.
Accelerating the region’s energy transition will support local manufacturers (Tengku Bahar/AFP via Getty Images)
Unfortunately, the Trump administration announced new anti-dumping and countervailing duties investigations into Indonesia and Laos in August, the outcomes of which are easy to guess. Washington is also targeting upstream supply chain segments with a national security trade investigation into polysilicon and derivative products. Any hopes that Southeast Asia might continue exporting to the US market are rapidly fading.
Trump’s trashing of US domestic green energy policies will inevitably slow down renewable energy capacity additions, so export diversification was always necessary for Southeast Asia’s manufacturers. But now it is urgent. Competing in China is not an option. The two biggest markets outside China and the United States are Europe and India. Europe, the largest solar importers, almost exclusively import from China. India emulated China with a Make in India policy, which included a domestically grown solar PV industry that quickly developed 100GW of solar panel manufacturing capacity while doubling down on protectionist interventions. Meanwhile, China’s export volumes continue surging.
Southeast Asia will have to rescue itself.
Renewable energy generation globally will double over the next five years and 80% will be solar PV. Accelerating the region’s energy transition will support local manufacturers. Southeast Asia is already the fourth largest source of global energy demand, will drive one-quarter of demand growth to 2035, and holds the largest solar PV module production capacity outside of China at 106 GW, with expanding production across other supply chain segments. Under already announced policies, the region wants to install 28 GW of solar PV and bring total capacity to 100 GW by 2030. Yet these investments in utility-scale solar are not even keeping pace with other major emerging economies such as India and Brazil.
If Southeast Asia adopted a net-zero policy pathway, the International Energy Agency estimates it would need more than 250 GW. Reaching this level would create demand, protect jobs and factories, and generate new employment as rolling out the panels inevitably employs more people than solar PV manufacturing.
Regional coordination would obviously scale such actions. The ASEAN Power Grid initiative already provides an institutional mechanism to accelerate solar deployment for the entire region through electricity grid integration.
ASEAN has trumpeted deepening regional economic integration as a response to tariffs. Solar would be a good place to start.
About the author
Robert Walker
Robert Walker is a Research Fellow at the Lowy Institute and works as an economist in the Institute’s Indo-Pacific Development Centre.
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