US-China tariff war: Will solar panel prices drop in Pakistan?

ISLAMABAD: The United States of America has imposed a massive 3521% tariff on solar panels made in four Southeast Asian countries – Cambodia, Vietnam, Malaysia and Thailand – as part of former President Donald Trump’s sweeping tariff policy on foreign products.

The move by the U.S. Commerce Department will make solar panels imported from these countries more expensive for American consumers. It has sparked speculation that the surplus panels will be sent to high-demand markets like Pakistan.

Pakistan, one of the world’s largest solar panel importers, has seen demand rise due to rising electricity prices. According to industry experts, Pakistan imported 17 gigawatts (GW) worth of solar panels last year, despite domestic demand being only around 8 GW, indicating a significant oversupply.

A report by renewable energy consultancy Renewable First highlights that Pakistan has imported $4.1 billion worth of solar panels in the past four years, most of which were sourced from China. In 2024 alone, Pakistan imported 17 gigawatts of panels, including 13 gigawatts directly from China.

The report attributes the surge in imports to a staggering 155 percent increase in electricity prices over the past three years, which is pushing consumers towards solar energy solutions.

While the US has targeted Southeast Asian countries with its latest tariff decision, many of the factories that make these solar panels are owned by Chinese companies. The US Department of Commerce has alleged that these factories receive subsidies from the Chinese government, allowing them to dump lower-cost solar panels and undercut competitors in the US market.

“These factories use Chinese technology to manufacture solar panels and equipment primarily for global markets, including the US,” Inverex Solar & Inverters CEO Mohammad Zakir told BBC Urdu.

Renewable First’s programme director Mustafa Amjad explained that Southeast Asian countries have acted as secondary manufacturing hubs for China to bypass direct tariffs. With the US market increasingly constrained, these Chinese-backed factories will likely look for alternative markets, and Pakistan could be one of them.

However, there is a catch. Despite the potential influx, experts have warned that Pakistan’s solar panel imports are already outstripping local demand, driven more by supply-side factors than actual market needs.

Hania Asad, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEFA), noted that despite some dumping of surplus Chinese panels in Pakistan, prices are unlikely to fall further. She pointed out that the Pakistani market is already flooded with low-priced Chinese solar panels.

Solar panel dealer Saleem Memon added that solar panel prices in Pakistan are currently around Rs23-24 per watt, with no import duty or sales tax, keeping prices highly competitive. He said that the influx of Southeast Asian-made panels is unlikely to cause any significant change in prices.