US-CHINA TRADE: China's commodity sector eyes reform, diversification to tackle challenges

The headwinds facing China’s steel industry, under pressure for four years from a property slowdown, have intensified with Washington ratcheting up tariffs against the country to 145%, and that is expected to hit a pause button on almost all direct exports of manufactured goods to the US.

China’s manufacturing sector accounts for around 45% of the country’s total steel consumption, according to data from Platts, a part of S&P Global Commodity Insights. While China’s domestic demand has remained sluggish, the export markets, particularly for the most steel-intensive mechanical and electrical products, have played a crucial role in supporting the manufacturing sector’s robust growth and steel consumption in the past few years.

In 2024, China exported $2.125 trillion worth of mechanical and electrical products, up 7.5% year over year and accounting for 59.4% of total merchandise exports, according to China customs data. Of this, about $305.97 billion worth of mechanical and electrical products, or 14.4% of the total, were exported to the US.

Industry sources expect China's steel demand from the manufacturing sector to decline in 2025 as tariffs weaken export-related manufacturing demand in the US.

“China’s manufactured goods should be able to reroute or find other buyers but that will take some time … I personally think the adverse impact of the US tariffs on China’s manufacturing and its steel demand will be the greatest in the second quarter, until some alternative methods are found,” a steel mill source said.

While other sources said it was too early to say anything given the volatility in US trade policy, they added that this high policy uncertainty could lead to a slowdown in the global economy, which will weaken demand for Chinese manufactured goods and steel. Even without the US tariff hikes, China’s direct steel exports were set to decline in 2025 amid rising trade barriers worldwide.

China’s exports of semi-finished and finished steel hit an all-time high of 117.055 million mt in 2024 amid slowing domestic demand, up 25.1% year over year, and accounting for 11% of China’s total steel production, data from China's customs department and the National Bureau of Statistics showed.

Vietnam, South Korea, Indonesia and Thailand were the top four destinations for China’s steel exports in 2024, accounting for about 28% of China’s total steel exports. The US has so far paused 25%-46% reciprocal tariffs on these four countries for 90 days as of April 9, but a resumption in these tariffs will impact their demand for Chinese steel.

Overseas orders falling

“Since the US raised its tariffs to 20% on all imports from China on March 4, our downstream manufacturing clients have already seen their overseas orders falling,” a mill source in China said.

“Our silicon steel orders totaled around 60,000 mt/month in early 2025, but have now fallen to just 20,000 mt/month,” he added. Silicon steel is widely used in electric machines, or motors, which convert electrical energy into mechanical energy or vice versa, and is key to mechanical and electrical products.

Another market source said a major heavy machinery manufacturer had an export gross profit margin of around 5%-10% at the end of 2024. “With a 20% tariff hike in early 2025, I think this manufacturer could still manage to export some of its products to the US, but now with tariffs up to 145%, it becomes impossible [to export to the US],” the source said.

“With the 145% tariff, except for a few high-margin American importers, such as those importing Chinese clothing, who may be able to bear the tariff burden themselves, most Chinese manufacturers have to find re-routing channels to the US, or find other buyers,” a market source said.

Steel production cuts

“As China’s steel exports demand is going to decrease and manufacturing demand will also come under pressure, we have China’s crude steel production in 2025 down around 37 million mt year over year to 968 million mt, but the cut may need to be deeper [with the US reciprocal tariffs up to 145%], preferably closer to 75 million mt, in order to keep supply and demand in balance,” Paul Bartholomew, senior analyst at Commodity Insights, said.

Market talk has suggested that China is planning to mandate a crude steel production cut of 50 million mt in 2025 from 2024. However, as of April 10, the central government remained muted over steel production cut measures for 2025.

As most steel mills are currently still operating at a profit, with hot-rolled coil sales margins at around Yuan 100-150/mt ($13.6-$20.4/mt) and rebar margins at around Yuan 50/mt, the average utilization rate at China's blast furnaces reached around 90% as of early April, up from 86% in late February and around six percentage points higher year over year, according to market sources.

Some trading sources said given the downward pressure on China’s economic growth in 2025, it remains to be seen whether there will be government-mandated steel output cuts. The ferrous metal smelting and processing industry accounts for 6.02% of China’s GDP and as of February employed around 1.745 million people, down 3.8% year over year, according to the National Bureau of Statistics.

However, they believe the rising steel production, coupled with shrinking demand, would drive steel prices lower in April and May, squeezing margins and leading to a decline in iron and steel production in the near future.

Platts-assessed domestic HRC prices fell to Yuan 3,250/mt on April 11, down 3.6% from Yuan 3,370/mt at the end of March and 14.7% from Yuan 3,810/mt a year ago.

In tandem with the expectation of falling iron and steel production, sources said they expect the iron ore market to shift into surplus in the second half of 2025, further driving down iron ore prices.

Factoring in trade tensions, Commodity Insights analysts said they estimate iron ore prices to remain at an annual average of $98/dmt for 2025, down from the annual average of $109.44/dmt in 2024. Potential stimulus measures are expected to help absorb some steel demand, supporting prices above $93/dmt in the second half of 2025, they added.

By Mriganka Jaipuriyar and Jing Zhang, Market Specialist - Metals

China’s copper smelting industry, suffering from persistent negative margins, is anxiously watching the US-China trade dispute given its heightened dependence on the US for copper scrap amid tight copper concentrate supply.

China’s clean copper concentrate treatment charges and refining charges have been in negative territory since Dec. 30, 2024, due to tight copper concentrate supply, and a shortfall in US scrap imports will worsen this situation, industry sources told Platts, a part of S&P Global Commodity Insights.

Platts assessed the CIF China clean copper concentrate TC/RC at minus $35.3/mt and minus 3.53 cent/lb, respectively, on April 15. This compares to minus $1.6/mt and minus 0.16 cent/lb at the start of 2025. They are at their lowest level since Platts started the assessment on Feb. 1, 2021, and underscores the tightness in copper concentrate supply. Chinese smelters are essentially now having to pay miners to turn their ore into metal.

The TC/RCs could see continued pressure in the second quarter on prevailing tight ore supply and expanding smelting capacity, aggravating historical lows already reached in the first quarter, according to Commodity Insights' Metals Trade Review.

China is the world’s largest processor, importer and consumer of copper, a critical mineral needed for all the most important clean energy technologies -- electric vehicles, solar PV panels, wind turbines, power grids and hydrogen electrolyzers -- which have been a pillar for Chinese growth over the last few years.

US supplied nearly 20% in 2024

China imported a total 2.25 million mt of copper scrap in 2024, up 13.2% from 2023, with the US its top supplier and accounting for 19.5% of the supplies. A combination of tight copper concentrate supplies and expanding secondary copper processing capacity has pushed up demand for copper scrap from China. Demand is expected to go up further this year with 1 million mt of secondary processing capacity due to come online, according to data from state-run research agency Antaike.

Beijing on April 11 raised tariffs on US imports to 125% in a whipsaw action that has seen both countries double down on tariffs, a move that could leave China’s copper scrap buyers scrambling for alternative supplies at a time of negative margins.

Chinese copper smelters have been using more copper scrap since 2024 to tackle slow growth in copper concentrate supply led by disruptions in global mines, a decline in new copper ore resources and the long development cycle for copper mines.

China’s secondary copper output using copper scrap as a main raw material accounted for 32.6% of the country’s total refined copper output in 2024, according to the China Nonferrous Metals Industry Association.

The US has a relatively well-established scrap copper recycling system with mature technology, which makes its copper scrap particularly attractive to the Chinese smelters owing to their stable quality with a high copper content.

But Chinese importers started scaling back their purchases of US copper scrap in November 2024 as concerns grew around China’s potential retaliation against US President Donald Trump's tariff escalation on Chinese goods.

A partial recovery in import activity was observed in January, driven by the absence of additional tariffs imposed by China on US copper scrap, but despite the modest rebound, import volumes from the US remained subdued, constrained by rising costs caused by high copper prices on the Commodity Exchange Inc and lingering uncertainties surrounding bilateral trade policies.

Copper prices on COMEX, part of the CME Group, rose significantly after Trump signed an executive order to investigate an alleged national security threat to the copper supply chain under Section 232 of the Trade Expansion Act on Feb. 25, 2025. The Comex copper first position closed at 521.6 cents/lb on March 26, hitting the highest level since April 12, 2020, according to data tracked by Platts.

Avoiding costly closures

So far, smelters have continued to seek copper supplies and run their plants, as shutting down smelting operations can be costlier.

They are able to maintain operating rates owing to term TCs, which cover the processing of term supply of copper concentrate, and is set at $21.25/mt for 2025. A fixed processing fee with downstream processors for copper cathode and healthy prices of sulfuric acid -- a byproduct of copper smelting -- have so far helped them manage their balance sheet and avoid large-scale operational cuts despite the negative margins.

But large-sized copper smelters typically cover 70%-80% of their copper concentrate via long-term contracts, and supplement this with spot supplies of copper concentrate or copper scrap, where the margins are steeply negative and vulnerable to US supply risks.

“There is no need to import copper scrap from the US now and it seems more economical to import copper cathodes instead,” said a southern China-based analyst. Copper cathode is mainly imported from the Democratic Republic of Congo, home to the unregistered Equivalent Quality Grade A (EQ) copper cathodes.

Downstream processors have been increasing the usage of EQ copper cathodes since last year, with the trend expected to continue in 2025.

Smelters are also exploring alternative sources for copper scrap like Russia and Southeast Asian countries, sources said.

During the 2018 trade conflict, China had imposed a 25% tariff on US copper and aluminum scrap imports, leading to a sharp drop in US supplies. China has since increased its scrap metal imports from Southeast Asian countries like Malaysia, which became the largest copper scrap supplier to China in 2019 and 2021.

Further expanding domestic recycling capacity is also on the table, some sources said. China in its action plan released early this year highlighted the construction of integrated copper scrap recycling bases and networks, with the aim to push “high-quality development” of the copper industry through the next two years.

By Mriganka Jaipuriyar, Lucy Tang, Market Specialist - Metals, and  Han Lu

China’s propane dehydrogenation plants are expected to cut operating rates or even halt operations, while ethane crackers are considering feedstock diversification after the Chinese government imposed further retaliatory tariffs on US goods.

The escalated tariffs by China on US goods -- currently at 125% -- will hit Chinese PDH plant operators and ethylene producers hard, as the US has been a key supplier of feedstocks including propane and ethane to the country.

Chinese PDH plant operators, who have been suffering losses in recent months amid negative margins, source about half of their propane feedstock from the US, industry sources said. Their margins averaged at a negative Yuan 268.6/mt (minus $36.7/mt) in Q1 2025, narrowing from an average of minus Yuan 328.3/mt (minus $44.9/mt) in Q4 2024, according to local energy information provider JLC’s data.

Already, overall costs were expected to increase by around Yuan 1,000-2,000 ($137-$274)/mt when China first imposed a 34% tariff on US goods, said a JLC analyst, and this could go even higher with an additional 50% tariff on April 10, and another 41% on April 12.

The import cost of propane, which accounts for about 80% of the total production cost at PDH plants, plays a vital role in the survival of those plants, according to market sources, who added that such plants typically have no alternative feedstocks available.

China has the world’s largest PDH processing capacity. S&P Global Commodity Insights projected the total processing capacity at China's PDH plants to reach 24.26 million mt/year in 2025, up by 2.68 million mt/year or 12.4% from the 21.58 million mt/year in 2024.

The margins for cracking propane into propylene for Shandong PDH plants were in negative territory at around Yuan 268.6 ($36.8)/mt in Q1 2025, compared with a loss of Yuan 328.3 ($45)/mt in Q4 2024, JLC data showed.

Several PDH plants in China cut operation rates in the first-half of April following the hikes in import tariffs, with run rates of the surveyed 32 plants averaging 67.7% of capacityas of April 10, down by about five percentage points from a week earlier, JLC data showed.

These plants usually sign one-year term contracts with propane suppliers, so they would probably have to pay the cancellation fees, or lift the minimum amount based on their respective contracts amid lower operating rates, sources added.

Ethane crackers’ dilemma

Chinese producers using ethane as a feedstock plan to file an appeal with the government to exempt ethane feedstocks from the tariffs, local market sources said, given that the US is almost the sole supplier of bulk ethane shipments globally, according toS&P Global Market Intelligence’s Global Trade Analytics Suite.

Beyond that, players like China’s Wanhua Chemical Group aim to diversify their feedstock supplies and may rely more on naphtha under the increased tariffs on US ethane imports, given the generally recovering price spread between ethylene and naphtha from January to April, Platts, a part of Commodity Insights, reported previously.

About 70% of China’s ethylene production is currently derived from naphtha, according to Sinopec's Economics and Development Research Institute 2024 annual report, but with higher yields and much better margins, industry players have long seen ethane cracking as a saving grace.

Analysts and market sources initially expected ethane cracking to remain profitable even with a 34% tariff on US feedstock, but a further 91% tariff from China has thwarted such hopes.

China imported 175,000 b/d of ethane in the first two months of 2025, down by 7.9% from 190,000 b/d in 2024. But the supply from the US increased to 99% in January-February 2025, from 98.2% in 2024, and 97.8% in 2023, data from the General Administration of Customs showed.

Shifting trade patterns

Chinese propane importers will likely have to source feedstock from the Middle East and other regions following the additional tariffs, market sources said.

Cargo swaps, a strategy used during the 2019 US-Chinatrade conflict, may resurface as Chinese importers seek partners to swap US cargoes.

“If [Chinese importers] switch to other alternative sources with lower import tariff, the price of those cargoes will likely be pushed up, while at the same time, other buyers from Southeast Asian countries may switch to procure from the US,” a Northeast Asia industry source said.

S&P Global Commodities at Sea anticipates significant shifts in propane trade flows, with US LPG potentially redirected to India and Southeast Asia, while Algerian LPG may increasingly head to China.

“China’s importers may need to source about 15 million mt/year of their propane imports from other regions following the increased tariffs on the US supply,” another trade source said.

However, with the export volume from the Middle East comparatively lower compared with the US, it’s unlikely for them to be able to meet their demand from other regions, sources said. The deficit will likely be met by purchasing US propane indirectly from other countries, they added.

In line with the quick expansion of the PDH capacity in China, the country’s propane imports reached 29.24 million mt in 2024, up by 13.8% from a year earlier, General Administration of Customs data showed.

At the same time, China’s reliance on US propane increased to 59.2% in 2024, making it the biggest supplier.

On the ethane front, ethane crackers might have to increase purchases of naphtha to make up for the loss in ethane feedstock, but the extent of switching would be clearer down the road as these crackers are fairly new and companies are still assessing how much naphtha is needed to replace the shortfall in ethane, according to sources with knowledge of the matter.

On April 10, China's Wanhua Chemical bought two 25,000 mt naphtha cargoes with a minimum of 65% paraffin content via a tender that closed on April 9. One cargo for delivery over May 11-20 to Yantai was awarded at a premium of about $13/mt to Mean of Platts Japan naphtha assessments, CFR, with pricing over the second half of April prior to delivery,trade sources said.

The cracker is currently using a 50-50 feed of ethane and naphtha, but its configuration might be tweaked to favor more naphtha if shipments of ethane are cut, a source close to the matter told Platts.

By Daisy Xu, Market Specialist - Oil and Rong Wei Neo

China is sitting sanguine about meeting its vast soybean import needs despite the ongoing tariff conflict with the US as over the last several years it made a concerted effort to develop alternative supply chains, especially turning to Brazil to buy more of the grain. But its crushing industry is feeling the brunt of the conflict, which has induced price volatility and significantly cut crushing margins.

In some ways, the 2018 trade dispute during US President Donald Trump’s previous term has turned out to be a blessing as it forced China -- the world’s largest soybeans importer -- to cut the share of US supplies in its import basket. The US remains China’s second largest soybean supplier, but its share fell to 24% in 2024 from 32% before 2018. The market share is expected to shrink even further given a robust production outlook for Brazil.

Brazil’s soybean area expansion over the last 30 years has been mostly to support growing Chinese demand. The country’s 2025-26 soybean crop is estimated at 171.5 million mt, about 12% above the previous season, according to data from S&P Global Commodity Insights.

Brazil has been the largest soybeans supplier to China since 2013, accounting for 68% of China’s soybeans imports in 2024, according to the US Department of Agriculture and S&P Global Commodities at Sea data.

In response to a series of US tariffs, China imposed a 10% tariff on US soybeans effective March 10. Furthermore, a 34% reciprocal tariff on all US imports was initially implemented and later increased twice, reaching a total of 125% effective April 12, which raised the total tariff on US soybeans to 138%.

In major agriculture bulk imports from the US in 2024, China took 13.5% of sorghum, 5.7% of wheat, 3.4% of corn and 77% of soybeans, according to CAS data.

China holds robust domestic reserves of around 44 million mt of soybeans, while increased output from South America has bolstered China’s position amid trade tensions, according to the USDA and analysts at S&P Global Commodity Insights.

Brazilian harvest completed

“The US export window to China generally ends in April,” Jack Larimer, senior research analyst at Commodity Insights, said.

The Brazilian harvest is essentially complete and China switches to Brazil at this time of year, he said, adding that the overall US soybeans market share is expected to shrink from 27% projected for the current marketing year to 21% due to the tariff dispute.

Brazilian soybean shipments to China in March are already the largest-ever monthly volume seen at least in the last eight years, at 11.6 million mt, according to CAS data.

“For soybeans, we expect Chinese demand for Brazilian supply to remain strong, especially between February and June, when Brazil dominates the global export window,” Geraldo Isoldi, agricultural markets analyst at King Korn said, adding that if there is any disruption to US shipments, the Chinese will just accelerate their purchases from Brazil.

Brazil's price competitiveness, especially during the peak export period, further supports China’s preference for Brazilian beans.

Platts assessment shows SOYBEX FOB New Orleans and SOYBEX FOB Santos at comparable levels in April, but Brazilian prices are lower from December through the first quarter when China buys large volumes. Platts is part of Commodity Insights.

"[Brazilians have] been selling [soybeans] aggressively these past few days, so [there are] no immediate [supply] concerns. But any slowdown in sales later would certainly affect the market," a Shanghai-based trader said.

China’s soybean buyers may start coming under pressure when Brazilian supplies thin out in the fourth quarter and US soybean supplies pick up pace. "The real test comes in Q4 -- everything depends on the Brazilian farmers' willingness to sell," the trader added.

Most of the impact from the US-China trade dispute will affect new soybeans crop (September 2025-August 2026), Larimer said.

A crushing impact

While soybean supplies are currentlynot impacted, China’s soybean crushing industry is feeling the brunt of the trade dispute. Platts-assessed CFR China soybean prices have risen 8% from this year’s low of $403.35/mt on Jan. 17, to $435.41/mt on April 11.

Soybeans are crushed to produce soybean oil and meal, with the latter used to feed China’s massive pig population. China’s weekly crush rate is at its slowest in five years, with cumulative crushing now lagging the previous year by around 1 million mt, according to Commodity Insights.

“This is a combination of a seasonal downturn in Chinese crushing as well as uncertainty in the soybean market leading to a slowdown in crushing,” Larimer said.

China soybean gross crush margins have now fallen 30% from this year’s high of Yuan 468.47/mt on March 4 to Yuan 326.91/mt on April 11, Platts data showed.

“In the near term, I expect crushing to remain slower than normal until a stable trade situation is established,” he added.

“Barring a new trade agreement similar to the Phase 1 deal signed in 2020, it seems likely that Chinese crushing growth will slow. The exact path is still to be seen, but the likely outcomes are a matter of severity rather than direction,” Larimer said.

Overall, the uncertainty caused by US-China tariffs will hurt the Chinese soybeans market and crush demand while supporting Chinese soybean meal prices, he added.

By Rohan Somwanshi, Shivam Prakash, Sayona anna John and Mriganka Jaipuriyar

China’s electric vehicle and battery sectors, seen as the nation’s pillars of growth, have been reeling under pressure from excess capacity and trade barriers, prompting export diversification strategies. But the latest US-China trade dispute, general anti-trade measures and policy uncertainty hurtled by the administration of US President Donald Trump have cranked up pressure on the sector by leaving the domestic economy and demand vulnerable.

“Chinese cleantech companies are ready for a new ‘Age of Discovery,’ exploring business opportunities around the world. But we hope our policymakers come up with strong measures to stabilize the economic turmoil and stimulate domestic consumer demand,” a Beijing-based cleantech investment manager told Platts, part of S&P Global Commodity Insights.

The manager said EV supply chains, like all other supply chains, nowadays count on the home market to be the backbone.

In 2024, China sold 12.86 million new energy vehicles, including battery and hybrid EVs, among which 5.86 million vehicles were exported and the remaining consumed by the domestic markets, according to the China Association of Automobile Manufacturers.

Part of the reason why Beijing has chosen to “fight to the end” in the trade conflict with the US is the confidence that China has a large domestic market, according to recent government statements. However, the government must adopt effective strategies to further exploit the domestic market amid the ongoing economic turmoil.

Based on the provincial-level 14th Five-Year Plan data, China’s total battery and hybrid EV annual production capacity is likely to reach about 36.6 million units in 2025, far above the sales volume in 2024. As such, the domestic market needs to be significantly expanded to address the supply-demand imbalance.

Shifting focus to Asia and Europe

An EV supplier told Platts that the Asian and European markets have become more important than ever before for them to maintain financial health.

On April 10, the EU and China agreed on setting a minimum price on made-in-China EVs, instead of adopting tariffs as the EU had initially proposed.

China-based EV producers and battery suppliers widely see this as an encouraging signal, because the melting tension between the EU and China could imply an easier pathway for them to further expand in the EU markets.

Compared with the US, the EU is a much larger EV market for China. Based on official customs data, China’s total battery EV export to the EU27 countries was around 222,000 units in the first half of 2024, down by 14.6% year over year due to tariff-related concerns.

Besides the EU, China’s other key EV export markets include Brazil, the Philippines, the UK, Thailand, India, Mexico, the UAE, and Australia, customs data showed. Maintaining and strengthening relationships with these countries is also a crucial factor influencing the EV and battery market’s future amid the US-China dispute.

Upstream lithium battery market faces challenges

S&P Global Mobilitydata showed final EV exports from China to the US are limited but the upstream lithium battery market will see a significant impact, and battery suppliers will need to find alternatives.

Only approximately 5,000 units of Polestar 2 and 200 units of Volvo EX30 light EVs were delivered from China to the US in 2024, and China exported only 974 units of commercial buses and trucks to the US in 2024, of which only 30% were battery EVs, data from Mobility showed.

However, 11% of the battery cells in light EVs produced in the US were made in China, and 62% of the cells in commercial medium and heavy vehicles produced in the US were supplied from China, according to Mobility’s data.

The escalating tariffs have made battery exports from China to the US a herculean task.

Several battery suppliers said they are still in the middle of calculating the exact tariffs imposed on their products, given that the US government has also introduced other tariffs in recent years.

The EV power batteries exported to the US could face up to 193.4% tariffs now, including basic tariffs (3.4%), fentanyl-related levy (20%), Section 301-related tariff (25%) and the reciprocal tariff (145%), a Beijing-based EV analyst told Platts.

Most recently on April 14, Trump suggested that he might temporarily exempt the auto industry from tariffs he previously imposed on the sector, to give carmakers time to adjust their supply chains, local media reported.

China-based market participants widely see this as a positive signal, which might imply that the Trump administration would pause the 25% tariffs imposed on EVs as well as the various tariffs imposed on EV components, notably lithium batteries.

However, the Chinese sources also highlighted that the implementation rules regarding this tariff exemption are highly uncertain and unpredictable, adding that the Trump administration’s ultimate purpose is still to shift production capacities back to the US, for both EVs and their components.

China also exported lithium iron phosphate batteries to the US to build energy storage systems, which are essential to address the intermittency of renewable electricity.

A China-based battery supplier said that, even within China, building ESS is capital-intensive, and current tariffs have made some US-based ESS projects economically unviable, which will result in some losses for Chinese companies.

Uncertainty in this sector is reflected in prices. Platts assessed battery-grade lithium carbonate at Yuan 70,000/mt ($9,524/mt) on April 9 on a DDP China basis, down Yuan 3,500/mt or 5% compared to the level on April 2, when Trump initiated reciprocal tariffs. This Platts assessment is an indicator of the sentiment in China's battery markets.

Economic stimulus

On April 9, amid the escalating US-China tariff war, the state-run People’s Daily published a widely circulated opinion article to highlight the country’s future direction of economic development.

The article highlighted that “vigorously boosting consumption is an inevitable choice to inject greater momentum into China’s economic development.” Earlier in March, China’s chief administrative authority, the State Council, launched its Special Action Plan to Boost Consumption, which is widely seen as an overarching guidance to reform the country’s economy to be more inward-focused and consumer-driven.

The article also reaffirmed that the country would continue to support its cleantech industries and decarbonization technologies, securing its role as a global leader in these fields.

A Chinese EV retailer told Platts that such consumption-focused reform is likely to be expedited amid the US-China dispute and escalating political uncertainties.

He emphasized that, compared with EV-specific policies like trade-in and purchase tax subsidies, a profound structural reform may drive more significant growth in EV sales in the domestic two-wheeler and four-wheeler markets.

By Ivy Yin, Market Specialist - Energy Transition

The US-China trade conflict has prompted Chinese solar PV manufacturers to accelerate supply chain diversification, but given all the external uncertainties, tapping into the domestic market remains crucial for their continued survival and success.

The administration of US President Donald Trump has imposed a tariff of 145% on imports from China, though the actual tariff rate varies depending on the product.

Chinese solar manufacturing companies began supply chain diversification well before the latest trade conflict. Several solar manufacturing companies told Platts, part of S&P Global Commodity Insights, that they are used to tariff disputes and have built or are planning to build new manufacturing hubs overseas and explore new export markets.

However, given all the external headwinds -- the biggest one being the risk to the global economy from the trade conflict -- the home market remains crucial for Chinese solar manufacturing companies to secure revenues and maintain financial health.

Tariffs in the solar industry

Decoupling from China’s solar PV supply chains has long been a bipartisan agenda in the US, with initial tariffs introduced on solar PV products in the early 2010s.

Back in 2015, the US used to be one of China’s largest export markets for solar modules, but nowadays, direct export from China to the US has become minimal due to escalating tariffs.

China Photovoltaic Industry Association data showed that in 2024, 40.7% of made-in-China solar modules were exported to the European markets and 37.5% were exported to the Asian markets.

To circumvent US tariffs, Chinese companies have in the last decade built factories in Taiwan, Cambodia, Malaysia, Thailand and Vietnam to process semi-finished products and then export them to the US. But the US has tried closing that loophole by imposing barriers on imports from these countries too.

In December 2014, the Barack Obama administration imposed antidumping duties of 11.45%-27.55% on solar cells produced in Taiwan, which pushed Chinese manufacturers to shift intermediate hubs to the four Southeast Asian countries.

In November 2024, the Joe Biden administration proposed antidumping duties between 21.31% and 271.2%, depending on companies, on solar cells from the four Southeast countries.

According to market sources, China’s top solar PV manufacturing companies all faced heavy duties, which significantly weakened the roles played by these four intermediate manufacturing hubs and disrupted trade flows.

Diversification becomes riskier than ever

Jessica Jin, Principal Research Analyst of Clean Energy Technology at Commodity Insights, said the US total domestic production capacity for solar PV modules is expected to reach around 10 GW in 2025, enough to meet current domestic needs.

However, she highlighted that the US capacity for upstream solar cell production still falls short, so the Chinese companies may still consider indirect exports of solar cells to the US.

“The rest of Southeast Asia (except Cambodia, Malaysia, Thailand and Vietnam) and India can be alternatives (intermediate manufacturing hubs). New capacities in the Middle East are also under planning,” she pointed out.

“Now, we have to find new hubs and new ways to unlock the US market, again,” a China-based manufacturer said, echoing Jin’s views.

However, the manufacturer highlighted that unlike in the Obama and Biden eras, US trade policies now become highly unpredictable.

He noted the recent reciprocal tariffs introduced by the Trump administration on April 2 that swept across countries globally include some alternative hubs considered by Chinese manufacturers, like Indonesia, India and Laos. He added that, despite the pause, such a move indicated the business environment in the US has become riskier than ever.

On April 2, the Trump administration announced a 26% reciprocal tariff on India, 48% on Laos and 32% on Indonesia. But all reciprocal tariffs, excluding the ones on China, have been suspended.

Home market remains core

In 2024, China’s solar PV module exports to the whole world totaled 238.8 GW, CPIA’s data showed. In the same year, the country installed 277 GW of solar PV generation capacity domestically, surpassing any other country’s total historical capacity addition.

Market participants highlighted that maintaining a healthy domestic market is crucial to digesting their solar products and stabilizing market prices.

CPIA forecasted that global demand for installation of solar PV generation capacity would reach 531-583 GW in 2025. In 2024, China alone produced 588 GW of solar PV modules, up 13.5% year over year.

Due to the persistent supply-demand imbalance, China’s module price fell by 29% year over year, CPIA’s data showed.

Platts assessed China’s solar module (50-100 MW) at 9 cents/watt on April 11 on a FOB basis, down by around 22% from July 10, 2024, when Platts started the assessment. China’s module price saw some increments in early 2025, mainly supported by two domestic measures.

On one hand, the power market’s price reform has pushed some risk-averse project developers to expedite their project completion, as projects completed after June 2025 will be pushed to participate in market-based trading and be exposed to greater price volatility. Such a rush for project completion stimulated short-term domestic demand for solar modules in the first half of 2025.

On the other hand, top solar PV manufacturers have collectively set floor prices for solar PV products to safeguard their financial health.

“For solar products, we need steady, prosperous domestic markets, both utility-scale and distributed [markets], to secure our business growth,” a Chinese manufacturer said, adding that the country’s overall economic health will be a decisive factor for energy demand growth and energy transition pace.

By Ivy Yin, Market Specialist - Energy Transition