Trade tensions escalate: China weighs ban on solar technology exports to the US

According to Reuters, Chinese officials have held talks with suppliers of machinery and technology for manufacturing solar panels. This is because Beijing is considering restricting exports of these technologies, especially the most advanced ones, to the United States. The discussions were probably the first consultations; according to the news agency, representatives have not yet discussed details or sought feedback from the industry.

China’s Ministry of Commerce has not commented on the report so far. However, this would be another show of strength in a sector where China has a large share, following Beijing’s restrictions on rare earth exports last year in response to US tariffs. All this is happening ahead of a summit between the presidents of the two countries, due to take place in Beijing in May.

It is probably also a response to Tesla and other companies seeking to reduce their dependence on Chinese suppliers. Tesla is also potentially one of the biggest competitors to Chinese solar companies. The company Tesla wanted to buy solar panel manufacturing equipment from was visited by government officials.

US onshoring and Tesla

Although renewables have taken a back seat under the Donald Trump administration amid his rhetorical and legislativeattacks on the sector, some parts of US industry are still seeking to move parts of their supply chains to the US. Elon Musk’s Tesla has taken steps in this direction in recent months.

The carmaker first began taking these steps under the previous administration, when this was a condition for government support, and during the pandemic, when the company was affected by trade restrictions. It was also in line with the broader US strategy for renewable technologies. At the time, Tesla sought to persuade its suppliers to move production to the United States or at least closer to the US, often to Mexico.

Last year, however, The Wall Street Journal reported that the carmaker had decided during the year to eliminate its dependence on China entirely. By then, some suppliers had reportedly already been cut off, and the company wanted to phase out the rest within one to two years.

Tesla is therefore aggressive in its efforts to “onshore” its supply chains. Last month, for example, Tesla itself reportedly sought to buy solar panel manufacturing equipment from a Chinese supplier for nearly $3 billion, according to some reports. The supplier, Suzhou Maxwell Technologies, was seeking approval for the export from China’s Ministry of Commerce. According to Reuters, this was the company visited by government officials.

Despite Trump’s climate “skepticism”, Musk said that solar power could supply 100% of US electricity production, and Tesla aims to build 100 gigawatts of solar power capacity by 2028. Tesla also includes SolarCity, which manufactures solar panels.

What to expect

China made similar threats last year regarding batteries and materials needed to build battery storage systems. However, implementation of the regulations was suspended until November this year. It is therefore possible that China wants to have a package ready by then that could cover the entire sector in which it has a dominant position.

According to Reuters, Chinese companies are still exporting equipment abroad, including to the US.

China’s dominance in the renewables sector, and solar power in particular, is well known. However, the sector is grappling with  economic problems, particularly poor profitability. Intense competition in the market is pushing companies into price wars, and many speak of overcapacity. Chinese companies are therefore exporting their capacity abroad. Nevertheless, they collectively lost about $5.5 billion last year.