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U.S. Solar Panel Tariffs Pose Potential Threat to Malaysia's Export Earnings and GDP
KUALA LUMPUR - Malaysia risks losing up to four percent of its solar panel export value should the United States (U.S.) proceed with proposed tariffs on imports of solar panel products, according to industry analysts. The expenditure could amount to billions of ringgit in lost export revenue, given that global photovoltaic (PV) trade surpassed US$40 billion in 2021.
The concern stems from a recent determination announced by the U.S. International Trade Commission (ITC), stating that U.S. domestic solar panel makers have been harmed by a flood of cheap imports from four Southeast Asian nations, including Malaysia, Thailand, Cambodia, and Vietnam. The ITC's decision, if affirmed by a majority vote, would instruct the Commerce Department to enforce countervailing and anti-dumping tariffs on solar products imported from the aforementioned countries.
According to Mohd Sedek Jantan, head of investment research at UOB Kay Hian Wealth Advisor, potential losses could be severe for Malaysia's solar sector due to a projected 30 percent demand reduction based on trade elasticity. The export downturn could lead to a significant decline in earning for the nation, affecting solar manufacturers significantly.
To alleviate the negative impact, industry experts advocate for diversification of export markets to regions outside the U.S., such as Europe, India, and Latin America. By adopting a Geoeconomic Hedge Strategy, countries, companies, and investors can manage risks associated with geopolitical and economic unrest, particularly in areas like global trade, supply chains, and investment flows.
Southeast Asian solar manufacturers, including Malaysia, may also benefit from catering to the growing demand for renewable energy in developing and emerging economies. The International Energy Agency projects that by 2030, 70 percent of solar PV installations will occur in these markets, potentially offering alternative and expanding markets for Malaysia's solar exports.
Meanwhile, Malaysia's solar industry player, Itramas Corporation Sdn Bhd, anticipates the US tariff hike could impact revenue but may find respite in domestic renewable energy projects. However, the potential weakening of the ringgit against the US dollar due to interest rate adjustments could pose challenges for the company since its technology components are procured in U.S. currency, according to managing director Lee Choo Boo.
To ensure the continued growth and resilience of the solar sector amidst global trade dynamics, Malaysia should strive to move up the value chain and reduce dependence on imported technologies. The industry should be focused on fostering local supply chain development, as opposed to merely constructing power plants based on foreign technology components.
- The U.S. tariffs on solar panel imports could potentially threaten Malaysia's export earnings and GDP, especially in the tech and finance sectors.
- The international trade unrest, such as the proposed tariffs on solar products, could lead to a significant decline in Malaysia's solar sector earnings.
- To alleviate the impact, Malaysia should consider diversifying its export markets to regions like Europe, India, and Latin America, and adopt a Geoeconomic Hedge Strategy.
- Locally, Malaysian solar companies could find respite by focusing on domestic renewable energy projects, reducing dependence on imported technologies, and fostering local supply chain development.
