US Tariffs and India's Solar Ambitions: A Catalyst for Strategic Reinvention

The recent imposition of 26 percent reciprocal tariffs by the Trump administration on Indian solar exports has sparked intense debate about the trajectory of India’s renewable energy ambitions.

June 30, 2025. By News Bureau

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US Tariffs

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Renewable energy ambitions

The global solar industry stands at a crossroads, reshaped by geopolitical trade winds and nationalistic economic policies. The recent imposition of 26 percent reciprocal tariffs by the Trump administration on Indian solar exports has sparked intense debate about the trajectory of India’s renewable energy ambitions. While the immediate impact may slow export volumes to the United States, this policy shift could paradoxically accelerate India’s emergence as a global solar manufacturing powerhouse. By forcing the industry to confront structural weaknesses and diversify its markets, these tariffs may ultimately align with India’s long- term green energy goals more effectively than uninterrupted trade ever could.

The Tariff Paradox: Short-Term Pain, Long-Term Gain

At first glance, the 26 percent reciprocal tariff on Indian solar modules appears punitive. However, contextualised against the 46 percent to 3,500 percent duties imposed on Southeast Asian competitors; India emerges with relative advantage. Comparative analysis reveals India’s strategic positioning: competing nations like Vietnam (46 percent), Thailand (36 percent), and Cambodia (49 percent) face significantly higher average tariffs. Only Malaysia’s 24 percent rate undercuts India slightly, creating a narrow window for Indian manufacturers to dominate 80 percent of the USD 15 billion US solar import market previously controlled by Southeast Asia.

Here’s what nobody’s telling you: even with tariffs, exporting to Iowa earns us 40 percent higher margins than selling in Indore. Why? Because American developers pay premium prices for quality, and our vertically integrated factories - from polysilicon to panels - deliver exactly that.

This pricing recalibration comes as global solar demand surges. The US itself requires 739 GW of new solar capacity by 2035 to meet decarbonisation targets. The temporary export slowdown may actually prevent market oversaturation, allowing manufacturers to optimise production lines for both quality and scale.

Manufacturing Scale: From Import Reliance to Global Leadership

India’s solar sector has already begun transcending its historical role as a China-dependent assembly hub. With module manufacturing capacity hitting almost 80 GW and solar cell production reaching 25 GW, companies are pioneering vertical integration from polysilicon to finished solar modules. Within 18 months, India’s solar cell production capacity is projected to double to 50 GW, reducing reliance on China and insulating against future trade shocks. This vertical consolidation - a direct response to global supply chain vulnerabilities exposed during the COVID-19 pandemic, or the infamous ‘Ever Given’ debacle – is a step by Indian manufacturers to beat component price fluctuations while improving cost efficiency by 30 percent to 40 percent. The tariffs accelerate this transformation. With certain companies pausing their overseas expansion, it is evident that manufacturers are pivoting and reallocating capital toward domestic capacity building.

Policy Crossroads: Walking the Protectionism Tightrope

The journey isn’t so simple though. China’s growth and dominance in the global solar sector was rooted in a deliberate strategy that met strong protectionist policies with aggressive, sustained investment in research and development. China’s top PV firms often reinvest around 6 percent to 8 percent of their revenue into RCD, driving rapid advancements and maintaining global competitiveness. In stark contrast, Indian manufacturers average just 1 percent -2 percent of revenue spent on RCD, a gap that raises the risk of technological obsolescence in an industry where incremental efficiency gains and disruptions determine survival.

This disparity is also reflected at the national level. India’s total RCD expenditure remains stagnant at 0.64 percent of GDP, compared to China’s mammoth 2.65 percent. The consequences of this gap are particularly visible in the solar sector:

Cell Efficiency: The Government in China has set high efficiency benchmarks for its manufacturers. Revised guidelines from China’s Ministry of Industry and Information Technology (November 2024) require a minimum of 23.7 percent efficiency for P-type cells and 26 percent for N-type cells. In India, the latest Approved List of Models and Manufacturers (ALMM) mentions lower efficiency ranges: 19 percent to 20 percent for solar modules for utility scale and 18.5 percent to 19.5 percent for rooftop applications. Moreover, Indian TOPCon modules account for less than 15 percent of the domestic market, while China dominates the global supply.
Technology Adoption: The global PV industry is rapidly shifting toward N-type technologies due to their superior efficiency and economic benefits. Indian manufacturers have been slow to adopt these innovations. While the ALMM mandate shields domestic players from overseas competition, it does not incentivise the leap to globally competitive technologies, potentially undermining both export ambitions and the achievement of India’s renewable energy targets.
Patents and Intellectual Property: China’s patent to GDP ratio is 13 times more than India, allowing China-based counterparts to lock in intellectual property advantages and reinforcing their technological lead.
Vertical Integration: China produces 76 percent of the world’s polysilicon and 96 percent of wafers, giving it near-total control over upstream supply chains. India, despite having 74 GW of module assembly capacity, still imports 90 percent of its cells. While there are plans to double domestic cell capacity, scaling up solar cell and wafer production is significantly more complex. The graph is not going to be as steep as it was for module assembly.

The tangible outcome of these gaps is also evident in project economics. India’s protective measures, such as the ALMM, basic customs duties (BCDs), and other interventions, have increased project costs by 24 percent since 2022, even as they shield domestic manufacturers from global competition.

Unless India rapidly scales up its RCD investment and accelerates the adoption of next- generation solar technologies, it risks falling further behind global leaders - jeopardising both its export potential and its ambitious domestic renewable energy goals. Even though India manages to capitalise on today’s scenarios, securing tomorrow should be an equal focus for both the Indian industry as well as the government.

Conclusion: Sunrise, Not Sunset

To those fearing tariffs, consider history. China’s 2012 EU duties birthed a domestic solar juggernaut. The Trump tariffs arrive at a similar inflection point for Indian solar. While immediate export headwinds are unavoidable, the sector’s fundamental strengths - cost- competitive manufacturing, vertical integration, and surging domestic demand - position India to emerge stronger. Success hinges on three pillars:

Collaborative Policy making: Industry and Government co-create policies, don’t just trade their wish lists.
Tech Leapfrogging: Systematic and strategic RCD focus, both by the industry and the government, in sync with Institutions and think tanks.
Glocal Factories: Gigawatt scale - quality focused plants, serving both Surat and San Francisco.

The sun isn’t setting on India’s solar dreams - it’s rising on a new dawn of techno-economic leadership. With strategic grit, this tariff turbulence will be remembered as the storm that cleared the path to dominance.

To every solar entrepreneur reading this: The world’s watching. Let’s give them a show worthy of an encore.

- Laxit Awla, CEO, SAEL

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