Over a decade’s worth of economic incentives — tariffs on solar components from China, the Inflation Reduction Act’s subsidies for American clean energy manufacturing, tariffs on Southeast Asian solar for avoiding tariffs on China — have been telling the American renewables industry in every possible way: Bring your supply chains home.
Now any company that hasn’t completely done so is being hunted down by Wall Street. East and Southeast Asia have been the most heavily hit by Donald Trump’s gamut of new tariffs, with China facing cumulative tariffs of over 60% and “reciprocal” tariffs of 46% hitting Vietnam, 49% on Cambodia, and 37% on Thailand.
Fluence, a battery storage systems company, has fallen almost 22% in the past two trading days. The Chinese solar company Jinko is down 15%.
“There no question that there will be impacts on the supply chain for clean energy, solar, wind,” Rob Collier, vice president of marketplaces for LevelTen, a platform for clean energy deals, told me. He’s spent the past few days on calls with developers and trade organizations, he said, and “truly, everyone is trying to get their arms around this and digest, what are the impacts?”
While there’s inherent uncertainty with anything involving America’s dealmaker-in-chief, the market has not held back from making its judgment.
Fluence has been actively trying to bring more of its supply chain to the United States for years, opening a battery module facility in Utah last September. But it “still relies on contract manufacturing in Vietnam to meet demand until U.S. operations scale,” wrote Jefferies analyst Julien Dumoulin-Smith in a note to clients Friday.
“We’ve credited Fluence for its domestic strategy,” the note said, “but the reality is that the company didn’t onshore operations soon enough (and understandably so). There’s no way to time tariffs of this scale.”
Like many companies with supply chains in Asia, Fluence got a slight breath of relief early Friday when President Donald Trump posted on Truth Social that he was in talks with Vietnam’s leader To Lam about potentially lowering the country’s tariff.
But another company that wasn’t so lucky is the inverter and battery company Enphase, whose shares are down 8% since the tariff announcement.
Like many electrical equipment and clean energy companies, Enphase has been telling anyone who will listen that it wants to get out of China. The company’s chief executive, Badri Kothandaraman, told Bloomberg in February, “We need to be making cell packs outside of China, and that’s what we are going to be focusing on the next year.” He added that a third of Enphase’s assembly was in the United States.
But at the same time, it was also telling investors how difficult reshoring will be.
In its annual report, Enphase disclosed that its lithium-iron phosphate battery cells “are supplied solely via our two suppliers in China,” and expressed both hope and doubt of its ability to source them elsewhere. “Although we are in the process of searching for other suppliers outside of China for future supplies, the expertise and industry for the LFP battery cell is primarily in China and we cannot be certain that we will locate additional qualified suppliers with the right expertise to develop our battery cells outside of China, if at all.”
The company said it had “focused efforts and resources on attaining manufacturers outside of China, primarily in Mexico and India,” but had since “moved a significant portion of our manufacturing to the United States.” About 85% of Enphase’s microinverters are made domestically, while the rest are made in China and India, according to Morningstar analyst Brett Castelli.
For the solar industry, China tariffs are nothing new — they’ve been in place to some degree or another since the 2010s. The industry’s response has largely been to move supply chains into Southeast Asia. U.S. solar imports from Southeast Asia hit $12 billion in 2023, according to Reuters, while Chinese imports have been almost eliminated.
“The industry has made significant progress in reshoring manufacturing to the US following the Inflation Reduction Act, but imports of items such as solar panels remain, especially for the upstream portion of the value chain (solar cells),” Castelli wrote in a note Thursday.
“Tariffing Vietnam is tariffing a lot of Chinese companies,” Damien Ma, an adjunct professor at the Kellogg School of Management and founder a China-focused think tank, told me. “If you’re a Chinese solar company right now, it’s not a great time.”
Mizuho Securities analyst Maheep Mandloi wrote to clients Thursday that residential solar battery companies were the most affected of any clean energy stocks, but that the entire sector’s exposure was “limited” due to equipment being a “smaller portion of developer capex and … nearshoring was already underway owing to IRA incentives.”
If anything, Mandloi wrote, the greatest risk to developers was “elevated costs of U.S. components, given cheap substitutes may no longer be available to others, and corresponding demand destruction from higher prices.”
Mandloi also forecast that residential installer Sunrun would suffer from the tariffs due to “limited pass through price power,” i.e. limited ability to make customers cover its increased input costs, which would decrease demand across the solar industry.
He also pointed to Enphase and the solar inverter and equipment company Solaredge, which is trading down 13% since Wednesday. That’s despite Solaredge’s manufacturing footprint having “entirely changed” due to subsidies for advanced manufacturing in the IRA, its head of investor relations, JB Lowe, said at a March conference. “We used to manufacture in multiple locations in Asia, in Mexico, in Europe even, and we have moved for all intents and purposes our manufacturing footprint entirely to the U.S.”
While Donald Trump may not be interested in climate change or green energy, his predecessor’s climate policies have been responsible for pulling substantial production from Asia to the United States, and now the market wants more of it.
“The IRA is more or less an anti-China industrial policy,” Ma told me.
Courtesy of Harbinger