How Could Tariffs Affect Domestic Solar System Manufacturing?

The solar energy sector has witnessed impressive growth in recent years, driven by increasing global demand to transition to cleaner energy sources. However, with uncertainty surrounding proposed tariffs, the future of solar panel manufacturing is becoming uncertain. Understanding how tariffs could affect domestic solar system manufacturing requires an analysis of current production levels, import dependence, and the growing need for localized manufacturing to meet demand.

The Current State of Solar Panel Manufacturing in the U.S.

Solar energy adoption in the United States is at an all-time high. According to the Solar Energy Industries Association (SEIA), U.S. solar manufacturing has grown nearly 4 times. More businesses are pivoting to solar solutions to cut operational costs, reduce emissions, and meet their sustainability goals. Despite this increase in adoption, domestic solar panel manufacturing accounts for only a fraction of the industry’s needs.

Today, the U.S. relies heavily on imported solar panels and components, particularly from countries like China, Malaysia, South Korea, and Vietnam. In 2024, the U.S. had 54.3 gigawatts (GW) of solar imports, representing a large amount of solar installed in the country throughout the year.

The disparity between domestic production and imports stems from several factors. Foreign manufacturers benefit from lower production costs, economies of scale, and significant government subsidies in their home countries. Meanwhile, U.S. manufacturers often face higher labor and material costs, making it difficult to compete on price. This gap leaves American companies and installers dependent on foreign suppliers to maintain the country's solar momentum.

How Proposed Tariffs Impact Domestic Solar Manufacturing

Tariffs are designed to level the playing field by imposing additional costs on imported goods, making domestically manufactured products more competitive. For the solar industry, proposed tariffs or duties on imported panels and components are meant to shift demand toward U.S.-made products.

This year, the U.S. imposed tariffs of up to 3,521% on four of our biggest importers: Cambodia, Thailand, Malaysia, and Vietnam. The latest projection of tariffs on China is 55% for many products, though it is unclear if this will increase for solar.

"This is a decisive victory for American manufacturing,” said Tim Brightbill, lead counsel to the American Alliance for Solar Manufacturing Trade Committee.

The goal of tariffs is to incentivize businesses to source their products locally, which also helps create jobs in the solar sector. Solar manufacturing has grown exponentially in the U.S. However, demand for solar systems is much higher than supply. According to the U.S. Department of Energy, domestic manufacturing can meet the demand for about 80% of solar systems. So, some companies import the products needed, especially with cheaper installation costs. Even with technological advancements and government programs, the domestic cost of manufacturing solar panels is higher than import alternatives, as Energea reports.

With the uncertainty around the tariffs for solar imports, it’s tough to pin down exactly how they will affect the price of solar installations in the U.S. Tariffs could potentially increase the cost of solar projects overall, for both residential and commercial customers.

“An expanded domestic supply chain could ultimately stabilize prices, but that transition could take years,” said Aaron Nichols, an advocacy specialist at Exact Solar.

It can also take some time to ramp up supply to meet demand. Building new factories, securing a skilled workforce, and sourcing raw materials all take time and significant investment.

Projections for Solar Energy Growth in the U.S.

By the U.S. Energy Information Administration’s estimates, there will be 63 GW installed in 2025, representing a 30% increase. By 2035, solar capacity could more than triple, per a report from SEIA.

Much of the growth will be fueled by businesses and industries looking to transition to greener operations. With corporations setting ambitious carbon-neutral and net-zero goals, the need for large-scale solar solutions is expected to rise.

Closing the Gap Between Supply and Demand

Tariffs alone won’t be enough to ensure domestic production meets soaring demand. A more comprehensive strategy is needed if the U.S. wants to position itself as a leader in solar panel manufacturing. Here’s what could make a significant difference:

Investment in Domestic Factories

Incentivizing manufacturers to establish new plants or expand existing facilities is critical. Financial support, such as grants, loans, or tax credits, can reduce the upfront costs of building advanced manufacturing sites. Programs from the Department of Energy could play a pivotal role in expediting growth.

Federal and State Policy Alignment

A stable policy environment is essential. Businesses need confidence that tariffs, subsidies, and incentives won’t change abruptly. Consistent policies encourage investments in long-term manufacturing efforts.

Improvement of Supply Chains

The manufacturing process relies on the availability of raw materials, such as silicon and glass. Building a resilient supply chain within the U.S. would ensure factories can operate at full capacity without disruption from international markets.

Development of a Skilled Labor Force

Expanding production capacity will require thousands of skilled workers. Workforce training programs should focus on equipping individuals with the necessary expertise to operate advanced machinery, maintain quality standards, and innovate manufacturing methods.

Technological Innovation and Cost Reduction

Competing with low-cost imports will require U.S. manufacturers to use cutting-edge technologies to reduce production costs while increasing efficiency. Leveraging innovations in automation and machine learning could make domestic panels more attractive both in price and quality.

The Future of Domestic Solar Manufacturing

Tariffs could play a pivotal role in shaping the future of domestic solar system manufacturing. By discouraging imports, they might provide the much-needed breathing room for U.S.-based manufacturers to scale up and compete on a global stage. However, sustainable growth will require a balanced approach that includes robust government initiatives, investment in innovation, and collaboration across the solar industry.

At Commercial Solar Arizona, we are constantly addressing the challenges and changes in solar imports and domestic manufacturing. If you have any questions or concerns about the costs of commercial and industrial solar projects, give us a call.