New U.S. Tariffs on Chinese Solar Imports Spark Trade and Supply Chain Concerns

As the new tariffs take effect in January, businesses across various sectors are bracing for potential disruptions. To minimize the impact of increased costs, they must now explore alternative sourcing options.

Starting January 1, 2025, the Biden administration will double tariffs on Chinese-made solar wafers and polysilicon from 25% to 50% and impose a new 25% duty on certain tungsten products.

The announcement is part of a strategy to protect American industries from what U.S. officials describe as unfair Chinese trade practices.

This is not the first time the U.S. has targeted the solar industry with tariff increases. Earlier this year, the Biden administration had announced a 100% tariff increase on solar panels from China, up from 25% to 50%.

These moves aim to protect against China’s policy-driven overcapacity that lowers prices and hinders the development of solar manufacturing capacity outside of China.

By raising tariffs on Chinese solar imports, the U.S. seeks to encourage domestic production in clean energy and technology sectors while countering China’s dominance in these critical industries.

However, it might not be the best time, as trade tensions between the U.S. and China are already growing. This measure at this time could potentially complicate supply chains, raise costs, and further escalate economic friction between the two economic powerhouses.

U.S. Trade Representative Katherine Tai emphasized the significance of the move, stating, “The tariff increases announced today will further blunt the harmful policies and practices by the People’s Republic of China.”

Tai added that these actions are a step toward creating a level playing field for U.S. industries and improving the resilience of critical supply chains. She also noted that the tariffs align with ongoing investments in clean energy technologies under the Biden administration’s climate goals.

Beijing has expressed concerns about the new tariffs. However, it signaled a willingness to negotiate while warning of the potential consequences of escalating trade barriers.

Why solar and tungsten are in the spotlight

The new tariffs specifically target industries where China has long dominated global supply chains. Solar wafers and polysilicon are critical components for solar panels, while tungsten products are widely used in electronics and industrial machinery.

The U.S. government’s decision highlights its focus on clean energy and critical materials, where Beijing has maintained a competitive advantage for years. China is currently the largest producer of polysilicon and tungsten globally, with its exports supporting numerous industries worldwide.

As of 2022, all new polysilicon plants are in China, bringing the total to 14 producers. The output of these plants reached 1.166 million tons in 2022, an 87.2% year-on-year increase. Beijing's control over supply chains gives it a competitive edge that the U.S. seeks to counter through domestic manufacturing incentives.

By raising tariffs on Chinese solar imports, the U.S. also aims to encourage domestic production, reduce reliance on Chinese imports, and create a more competitive marketplace for American manufacturers.

As part of the “Investing in America” agenda, the Biden-Harris Administration has already spurred over $860 billion in business investments through targeted public incentives in future-focused sectors, including electric vehicles (EVs), clean energy, and semiconductors.

Backed by the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act, these investments are generating new jobs in manufacturing and clean energy while assisting underserved communities in their recovery efforts.

However, industry analysts warn that these measures could disrupt supply chains and raise the prices of solar panels and other products.

This, in turn, could slow the transition to renewable energy in the short term, even as the U.S. positions itself for long-term gains in manufacturing capacity.

Rising trade tensions and supply chain fallout

The tariff increase is just the latest development in a broader trade conflict between the U.S. and China—across multiple industries.

Recent moves by the U.S. include expanding export controls on high-bandwidth memory chips and semiconductor manufacturing equipment. Over 140 Chinese companies have been added to the U.S. “entity list,” restricting their access to American technology.

Matthew S. Axelrod, the assistant secretary for export enforcement, commented on this expansion, saying, “The purpose of these Entity List actions is to stop PRC (Chinese) companies from leveraging U.S. technology to indigenously produce advanced semiconductors.”

In response, China has tightened its controls on critical minerals such as graphite, a key material used in electric vehicles (EVs) and battery production. These measures reflect the growing economic and technological rivalry between the two nations, with each side leveraging its strengths to gain the upper hand.

Economic experts are divided on the potential impact of these policies. While supporters argue that the tariffs will protect American industries and jobs, critics warn of unintended consequences, including higher consumer prices and slower economic growth.

A recent Reuters/Ipsos poll found that only 29% of Americans support tariffs if they increase the costs of everyday goods. This indicates limited public enthusiasm for aggressive trade measures.

A five-year trade battle over export controls

For five years, the U.S. and China have been locked in an escalating trade war focused on critical minerals and advanced technologies.

The conflict began in 2019 when the Trump administration placed Huawei on the U.S. Entity List, cutting off its access to U.S. semiconductor chips and banning it from the U.S. market.

Tighter restrictions soon followed, targeting companies like Semiconductor Manufacturing International Corporation (SMIC) and closing loopholes for chip imports through foreign manufacturers.

The trade war has intensified under the Biden administration. In 2022, new export controls were introduced to restrict China’s capability to produce advanced semiconductors for military applications and block its access to advanced AI chips and semiconductor equipment.

China retaliated in 2023 by restricting imports of gallium and germanium, two critical minerals essential for semiconductor production. Imports of these materials to the U.S. dropped sharply—despite some companies securing limited licenses.

Later, in 2023, the U.S. expanded restrictions on AI chips, which led China to impose controls on high-purity graphite—a vital component for EV batteries and semiconductors. With no domestic graphite production, U.S. industries reliant on Chinese materials have felt the impact.

What could happen next?

The challenge for the U.S. is to balance the need to protect domestic industries with maintaining affordability for consumers. In the clean energy sector, higher tariffs on Chinese solar imports could slow the adoption of solar technologies by raising installation costs and delaying climate goals.

For China, the tariffs highlight its vulnerability in critical exports and its reliance on U.S. technology for high-tech industries. While Beijing has indicated a willingness to negotiate, its recent actions—such as restricting graphite exports—indicate that it is prepared to defend its interests aggressively.

If you import solar and tungsten products from China, please reach out to one of our trade professionals to discuss the potential impact of these new tariffs on your business.