Chinese solar companies are setting up operations in Indonesia to avoid high US tariffs on Southeast Asian manufacturers.

The tariffs, announced in April by the Trump administration, target Chinese firms using Vietnam, Malaysia, Thailand, and Cambodia to bypass earlier restrictions.

The new duties can reach up to 3,500%, prompting firms to shift to Indonesia and Laos, which are currently exempt.

Recent investments include four solar projects in these countries, with two more in development, aiming for 22.9 gigawatts of production capacity mainly for US export.

To attract foreign investment, Indonesia lowered local content requirements for solar projects from 40% to 20%. The country also secured a US$5 billion investment from China’s Hongshi Group for a solar industrial estate in East Kalimantan.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ US tariff escalation creates a ‘tariff hopping’ cycle in the solar industry

The US-China solar trade dispute shows how protectionist policies often create predictable migration patterns rather than reviving domestic manufacturing.

Chinese solar manufacturers have systematically relocated their operations across Southeast Asia since 2012, when the US first imposed anti-dumping tariffs on Chinese solar panels 1.

This created a manufacturing boom in countries like Vietnam, Malaysia, Thailand, and Cambodia, which grew to account for over 40% of global solar module manufacturing capacity outside China and $12 billion in US exports by 2023 2.

The cycle is now repeating with Indonesia, as manufacturers relocate operations to stay ahead of expanding US tariffs, highlighting how trade barriers often reshape supply chains rather than eliminating competition.

This trend is also observed in other industries where tariffs have prompted strategic production shifts instead of bringing manufacturing back to the tariff-imposing country.

2️⃣ Indonesia’s solar ambitions face significant domestic hurdles despite opportunity

While the influx of Chinese solar manufacturers presents Indonesia with a rare opportunity, the country’s renewable energy transition faces substantial internal challenges.

Despite having potential for 3,294GW of solar capacity, Indonesia has only reached 140MW of rooftop solar installations 3, showing a massive gap between potential and actual deployment.