THE BIGGEST NEWS IN THE MARKET IS ALL ABOUT TARIFFS

Introduction:

The biggest news in the industry right now surrounds tariffs for modules, EVs, and batteries coming from Asia. With several different cases and executive orders, we wanted to put everything together in one place.

At the same time, we are seeing some slowdown in overall job growth which may mean interest rate relief is coming.

Section 201 Tariff Changes:

There were two major changes from the President on the existing tariffs under section 201 from a few years ago.

• Bifacial module exemption has been removed: Back in 2022, the President excluded bifacial modules from tariffs since there was almost no US-based manufacturing of bifacial modules. Partially as a result of a lack of tariffs, the importation of bifacial modules has grown 10X over the last 2 years.
• Cell Import Quota Raised: The US does not yet have any meaningful cell manufacturing capacity. The white house has also increased the amount of cells that can be imported tariff-free to support US module manufacturing from 5GW to 12.5GW. This is good news for domestic module manufacturing.

New Tariffs:

Last week the White House announced new tariffs on a variety of items coming from China to protect domestic manufacturing including:

• PV Cells: Tariffs double from 25% to 50% for any cell manufactured in China.
  • This is largely symbolic as there are almost no cells of Chinese origin used in the US based on the existing tariffs.
• Batteries:
  • Tariffs on lithium-ion batteries for EVs will increase from 7.5% to 25% this year.
  • Tariffs on lithium-ion batteries for other applications (like Stationary Energy Storage) will increase from 7.5% to 25% in 2026.
    • Pushing the tariffs out until 2026 will give the industry time to move supply chains around and find alternative suppliers if needed and should not cause any meaningful short-term disruption to the market.
  • New 25% tariffs on natural graphite and magnets hit in 2026 and other critical minerals used in battery production will hit this year.
• EVs:
  • Tariffs on Chinese EVs jump from 25% to 100%.
  • There are almost no Chinese EVs coming into the US market now and this will effectively block them altogether. Great news for the US EV manufacturing sector, but possibly bad news for consumer choice. The relatively inexpensive EVs from BYD are actually pretty impressive.
• AD/CVD: We have two separate cases under Anti-dumping and Countervailing Duties.
  • #1 Tariff pause is expiring: Back in 2022, President Biden ordered a 2-year pause on duties for certain cells and modules from Vietnam, Cambodia, Malaysia, and Thailand that were manufactured with cells and other materials of Chinese origin. This pause expires on June 6th with tariffs as high as 200% being enforced immediately after.
  • #2: New AD/CVD Case: Last week the Department of Commerce opened a new investigation into PV cell imports in Cambodia, Vietnam, Thailand, and Malaysia. This investigation is investigating the import of any PV cells produced in the region regardless of the country of origin for the cell materials.

The good news is that it is reported that the US has more than 12 months’ worth of module inventory (which is likely evidence of dumping of modules from Asia) and a bunch of domestic module manufacturing coming online that will help off-set the disruption that will be coming as a result of this tariff risk. The recent order to raise the import cap of cells to 12 GW will also help.

The bad news is that all of the uncertainty around these tariffs will undoubtedly reverberate across the market and create havoc, pushing projects out if modules cannot be procured.

Unemployment and Interest Rates:

Until recently, the labor market (and consumer spending) has been very resilient in the face of high interest rates, but we are starting to see cracks.

In April, job growth slowed and unemployment raised very slightly to 3.9% (still historically low).

The inflation data also came in favorably, which is making the market hopefully we see an interest rate drop in the near future.

Meet us at Intersolar Munich:

Let us know if you are heading to Munich and would like to connect at the show!!