In a dramatic escalation of trade tensions, Donald Trump has imposed preliminary countervailing duties of 126% on solar imports from India, a move that threatens to derail the recently discussed India–United States trade relations agreement.
The decision, announced by the United States Department of Commerce, comes after a determination that New Delhi unfairly subsidised its solar manufacturing sector, allowing exporters to sell modules in the US market at artificially low prices.
The move reinforces Trump’s long-standing “America First” trade policy, even if it risks disrupting strategic economic ties with one of Washington’s key Indo-Pacific partners.
What Triggered the 126% Tariff?
- Indonesia: 86% to 143%
- Laos: 81%
The investigation is part of a broader crackdown on what US officials see as indirect Chinese influence in global solar supply chains. Facing heavy US tariffs, many Chinese manufacturers shifted production to Southeast Asian nations — including India — to maintain access to the American market.
A Blow to the India–US Trade Framework
The timing of this tariff announcement is particularly sensitive. Just weeks earlier, New Delhi and Washington had agreed on a trade framework aimed at lowering US tariffs on Indian exports to 18% from the earlier 50%.
However, the situation became more complex after the Supreme Court of the United States struck down certain Trump tariffs as unconstitutional. In response, Trump introduced a new baseline 10% duty on most imports, with warnings that it could rise to 15%.
Now, the fresh solar duties signal that sector-specific protectionism may override broader trade negotiations. Adding to the uncertainty, officials from both countries postponed a scheduled three-day meeting to discuss the interim trade deal.
India’s Solar Export Boom: A Sudden Halt?
India has rapidly emerged as a major supplier in the global solar market. Solar exports to the US reached $792.6 million in 2024, marking a nine-fold increase compared to 2022.
The surge was driven largely by:
- Global demand for renewable energy
- Chinese manufacturers relocating production
- India’s expanding solar manufacturing base
In fact, India, Indonesia, and Laos accounted for 57% of US solar module imports in the first half of 2025.
But this growth story now faces serious disruption.
Oversupply Risk in India
As of January 2026, India’s installed solar-module manufacturing capacity stood at over 160 GW, while domestic demand was estimated at only 40–45 GW annually.
With US exports under threat, Indian manufacturers could face:
- Excess inventory
- Falling prices in the domestic market
- Margin compression
- Production slowdowns
Industry analysts warn that companies heavily dependent on the US market will be most vulnerable. With limited alternative export destinations, many firms may be forced to redirect output domestically, leading to oversupply and pricing pressure.
Rajan Kalsotra, Senior Consultant at EUPD Research, described the duties as a “major setback” for Indian manufacturers reliant on American demand.
Impact on US Solar Industry
While the tariffs aim to protect domestic manufacturers, they may also create unintended consequences for American solar developers.
The US solar industry is already grappling with:
- High interest rates
- Supply chain volatility
- Policy uncertainty
By restricting Indian imports, project costs in the US could rise significantly. Higher panel prices may slow installations and delay renewable energy targets.
Ironically, while the administration seeks to boost domestic manufacturing, the immediate effect could be higher energy transition costs.
The China Factor
A key driver behind the investigation is the perception that Chinese firms are bypassing US tariffs by relocating operations to countries such as India, Indonesia, and Laos.
This supply chain shift has transformed India into a major beneficiary of global trade realignments. However, Washington’s latest move suggests the US is now scrutinising these alternative production hubs more closely.
What Happens Next?
The 126% tariff is preliminary, not final. A final determination on subsidies is expected by 6 July 2026, alongside a parallel anti-dumping investigation.
Possible outcomes include:
- Revision of duty rates
- Confirmation of high tariffs
- Diplomatic resolution through negotiations
- Legal challenges at international trade forums
Until then, uncertainty will hang over both the solar industry and the broader India–US trade talks.
Bigger Picture: America First vs Strategic Partnership
The latest tariff action underscores a larger dilemma. While India and the US share strategic interests in technology, defence, and Indo-Pacific security, trade remains a sensitive area.
The move highlights that domestic political and economic priorities in Washington may outweigh diplomatic considerations. For India, the challenge will be to diversify export markets and strengthen domestic demand to absorb excess capacity.
Conclusion
Trump’s 126% preliminary tariff on Indian solar imports represents more than a trade dispute—it signals a recalibration of economic priorities. As both countries navigate negotiations, the decision casts doubt on the speed and scope of any interim trade deal.
For India’s solar manufacturers, the coming months will be critical. Much will depend on the final ruling in July 2026 and whether diplomatic channels can prevent a deeper trade rift.
Disclaimer:
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