Trouble ahead for Malaysia’s green future as Trump’s tariffs rattle solar sector
Malaysia’s US$3.8 billion renewable energy sector is bracing for a major setback as US President Donald Trump moves to impose steep tariffs, scale back climate financing and abandon global climate commitments – a “triple whammy” that analysts say could stall Southeast Asia’s clean energy transition.
Malaysia was the world’s third-largest producer of solar photovoltaic (PV) components – the inexpensive, essential parts used in solar panels – in 2022, and a major supplier of polysilicon, another critical material in solar manufacturing.
Together with Vietnam, Thailand and Cambodia, these four Southeast Asian nations supplied more than 80 per cent of US solar PV imports in the first half of 2024.
However, the new tariffs on these nations announced by Trump last week – including 24 per cent on Malaysian products – are set to drastically escalate the costs for US importers and intensify pressure on the region’s solar industry.
Southeast Asia’s major economies have tied their growth strategies to the clean energy transition – but experts warn that the US shift back to fossil fuels could slow their progress.
On Tuesday, Malaysian Prime Minister Anwar Ibrahim said there was no turning back, adding the sector’s growth is no longer simply a matter of environmental virtue but a strategic economic necessity “poised to define the industrial landscape of the coming decade”.
But fears are mounting among nascent green businesses in the region as the Trump administration retreats from climate pledges and piles punishing tariffs onto exports.
“With regards to renewable energy, solar modules are going to take a hit in the long run,” said Tonichi Regalado from the Philippines’ climate mitigation group Render. “Wind energy components like turbines and transformers are also sourced from Southeast Asia and China. With the US pulling back on onshore and offshore wind, the entire industry faces a nosedive.”
Cambodia and Vietnam have been hit the hardest by the new US tariffs – 49 per cent and 46 per cent respectively – as Washington moves to shut down what it sees as a back door for Chinese supply chains.
Malaysian solar manufacturers have already been slapped with a tariff of 9.13 per cent in October 2024 as part of Washington’s anti-subsidy countervailing effort against companies in Malaysia, Thailand, Vietnam and Cambodia.
This is on top of a blanket 30 per cent tariff imposed on all solar panel imports into the US in 2018. The 24 per cent tariffs on most Malaysian products may undermine the country’s goal of reaching 70 per cent renewable energy capacity by 2050, as shrinking export demand could limit reinvestment in domestic solar deployment.
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US tariff storm disrupts global business expansions, but some see opportunities
US tariff storm disrupts global business expansions, but some see opportunities
Lights dim on solar?
Nithi Nesadurai, the director of Climate Action Network Southeast Asia, described the sweeping tariffs imposed by the US government as a “triple whammy” following Washington’s withdrawal from the Paris Agreement and reduction in climate financing via USAID.
“These tariffs have exacerbated and aggravated the already volatile situation facing developing countries, especially those in Southeast Asia,” Nesadurai told This Week in Asia.
Washington’s pivot away from clean energy comes at a time when renewable energy use is surging worldwide.
In 2024, more than 40 per cent of global electricity came from renewables, driven largely by solar, according to the UK-based think tank Ember. Rapid growth in battery storage and rising power demand from electric vehicles and data centres have helped push clean energy adoption to new highs.
Yet while Southeast Asian factories supply much of the hardware for that transition, the region itself is falling behind.
Clean electricity accounts for only 26 per cent of the energy generated in Southeast Asia – well below the global average.
And despite its 70 per cent renewables target, Malaysia has only reached 19 per cent as of 2024.
Ember noted that this lag persists despite Southeast Asia’s immense renewable energy potential, with over 31,000 gigawatts of possible solar and wind capacity. So far, however, only around 33 gigawatts have been developed.
“Tapping into solar and wind potential would enable Asean to unlock the renewable energy market needed to sustainably meet growing energy demand and climate targets,” said Dinita Setyawati, Ember’s Senior Electricity Policy Analyst for Southeast Asia.
“With stronger policy support to drive renewable energy deployment, Asean has the potential to be at the forefront of the energy transition.”