Tariffs Threaten Energy Transition Beyond US Borders
Trade war risks stunting renewables progress in America, with Southeast Asian nations caught in the crossfire between superpowers.
US President Donald Trump’s looming tariffs could curtail the energy transition both domestically and across emerging markets and developing economies (EMDEs), experts have warned.
Aimed at boosting US manufacturing, the new tariffs are seen as weakening trust in US economic policymaking, partly due their on-off nature of their introduction. While many industries are impacted, renewable energy is particularly exposed.
As the world’s second largest carbon emitter, the US may fall farther behind the rest of the world in the transition away from fossil fuels, by cutting off access to Chinese-developed cheap, clean energy technology.
Renewable energy sources – including wind and solar – contributed approximately 21% of total US utility-scale electricity generation in 2023. A significant proportion of materials used for renewables in the US are imported, most from EMDEs.
“The 2025 US tariff expansion introduced a substantial cost increase across renewable energy equipment such as solar, wind, battery, and grid component supply chains,” Scott Kelly, Senior Vice President at sustainability intelligence firm Risilience, told ESG Investor.
“The breadth of the new tariffs – applied across multiple countries and technologies without phasing or exemptions – makes them significantly more disruptive than previous trade interventions.”
Outpaced on transition
A total US$7.9 billion in clean energy manufacturing investment was cancelled or delayed in Q1 2025 alone, more than three times the level seen over the previous 30 months.
Kelly said that investors in clean energy infrastructure, supply chains, and climate-aligned funds have “legitimate reasons for concern” with the 2025 US tariffs introducing regulatory risk, increased input costs, and creating “significant uncertainty” across renewables markets.
“These disruptions come when the US needs to triple its annual renewable energy deployment to remain on track for its 2035 zero-carbon power sector target,” he added.
“Without offsetting incentives or exemptions, this policy direction places net zero goals at risk just as the pace of transition needs to accelerate. The US now risks being outflanked by countries that have embraced the transition to a low-carbon economy.”
The tariffs also risk undoing many of the benefits and opportunities created by the Inflation Reduction Act (IRA) under the previous Joe Biden presidency. Trump has pledged to disassemble the IRA and has frozen permitting and loans for some renewable projects while prioritising developing fossil fuel projects.
The IRA helped drive more than US$115 billion of private sector investments in battery, electric vehicles, solar, and wind manufacturing between 2022 and 2024. Meanwhile, 95% of projects waiting to be interconnected to the US grid are solar, storage and wind.
Deirdre Cooper, Head of Sustainable Equity at asset manager Ninety One, which specialises in EM investment, said that tariffs are the “biggest policy risk to a second Presidency term under the Trump administration”.
“At present, it is unclear what the endgame of the current tariff discussions will be,” she added.
Mixed impacts
Southeast Asia is set to be the region most acutely affected by the Trump administration’s tariff policy, with close ties to China widely viewed as a key driver. In recent years, many Chinese firms have moved operations or supply chains to Southeast Asia in a bid to avoid direct tariffs imposed since the start of Trump’s first term in 2017.
The US Commerce Department this week unveiled plans to impose tariffs of up to 3,521% on imports of solar panels from four Southeast Asian countries, alleging that subsidies from China are supporting “unfairly cheap” exports to the US market. These tariffs – targeting companies in Cambodia, Thailand, Malaysia and Vietnam – would be in addition to others already instigated by the Trump administration.
EMDEs, including countries in Southeast Asia, urgently need to transition their own economies to renewables. Collectively, they contributed 95% of global emissions increases between 2014 and 2024 and accounted for 75% of global emissions in 2023. However, to achieve this, these regions require support from investors and policymakers in developed countries.
“The realignment of US trade policy on clean energy has global implications, many of which fall disproportionately on EMDEs,” Risilience’s Kelly warned. “As clean energy trade becomes more fragmented, many lower-income countries face the prospect of falling between competing trade blocs. Without coordinated global policies, the transition may entrench, rather than ease, existing economic divides.”
BloombergNEF (BNEF) has forecast that the US will install over 50 gigawatts (GW) of solar modules this year, most of which is expected to come from Southeast Asian factories. The strategic research provider estimated that 96% of solar cells would need to be imported in 2025 to meet local demand, with domestic production severely insufficient to fill the gaps in supply. The US also imported almost 6GW of wind turbine blades and hubs in 2024, with almost half of the blade imports coming from Mexico.
According to BNEF, the APAC region was expected to be the hardest hit by Trump’s tariffs even before the proposed additional tariffs on solar panels from the four Southeast Asian countries.
Accelerated transition
However, there is also an opportunity for EMDEs to capitalise on the tariffs to turbocharge their transition to clean energy as China redirects its export efforts.
EMs received between a third and a half of total Chinese solar module, wind turbine, battery cell and EV shipments by dollar value in 2024, with “notably large” increases in exports to Brazil, Mexico, Pakistan and Southeast Asia during the past three years.
“Manufacturers in mainland China will redouble their efforts to sell to emerging economies, said Antoine Vagneur-Jones, Head of Trade and Supply Chains at BNEF. “Already, the share of batteries, EVs, solar modules and wind turbines shipped to low-to-middle-income markets has been growing steadily over 2022-24. The provision of low-cost equipment and goods could accelerate their energy transitions.”
BNEF also expects factories in Southeast Asia have their resilience boosted by Trump’s tariffs, with manufacturers benefitting from their proximity of Chinese solar supply chains and investments.
Kelly noted that the tariffs could result in lower-cost solar equipment, accelerated adoption, and a steeper emissions reduction curve despite protectionism in the Global North. “Ironically, the US tariffs may redistribute clean tech benefits more equitably, at least temporarily, across under-electrified or underserved regions,” he said.
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