Are U.S. tariffs a threat or opportunity for ASEAN’s energy transition?

Tariff tensions could reshape ASEAN’s renewable energy future. (Photo:iStock)

After U.S. President Donald Trump announced new tariffs on select imports this April, ASEAN countries swiftly launched negotiations in a bid to cushion the blow.

According to analysis by financial advisory firm S&P Global, nations that had previously benefited from the China+1 strategy now face rising tariff risks. Steep U.S. tariffs could dampen electricity demand from Southeast Asia’s manufacturing sector, casting uncertainty over the region’s energy transition.

Solar costs keep falling, firms urged to reassess power strategies

In a recent webinar hosted by S&P Global Commodity Insights, experts examined the implications of U.S. tariffs on ASEAN’s clean energy and power sectors. The discussion focused on projected trends in solar development and how companies might adapt.

Cecillia Zheng, an analyst specializing in natural gas, power, and climate solutions, noted that stricter U.S. trade rules have already affected Chinese production lines and are beginning to erode the value-added exports of ASEAN countries—particularly in sectors such as electronics, automotive, machinery, clean energy, and solar which face higher tariff pressure.

According to S&P Global data, Vietnam, Thailand, and Malaysia—ASEAN’s top solar exporters—shipped nearly 30 GW of solar modules and cells to the U.S. in 2023, valued at over USD $9.5 billion.

Vince Heo, another analyst, pointed out that Chinese solar manufacturers have ramped up production, leading to global oversupply and offsetting post-pandemic inflation effects. This has kept capital expenditures for utility-scale solar projects in Southeast Asia from rising significantly—some have even seen slight declines. Heo forecasts continued drops in solar power costs.

In Vietnam, the levelized cost of electricity (LCOE) from onshore wind and solar is already lower than coal-fired power, with solar-plus-storage costs also steadily falling. Within 2–3 years, these costs are expected to reach parity with coal, prompting large energy users to reconsider their power sourcing strategies.

Heo added that if the U.S. enforces anti-subsidy and anti-dumping tariffs, a wave of low-cost solar modules and storage systems could flood into ASEAN markets. The Philippines is particularly well-positioned to benefit, with its relatively liberalized electricity market and strong governmental support for renewable energy.

Vietnam, Thailand, and Malaysia are most exposed to the new U.S. tariffs. (Image: S&P Global Commodity Insights webinar)

Vietnam most vulnerable as tariffs threaten energy progress

Given their deep reliance on the U.S. market, ASEAN countries face reduced foreign investment and lower manufacturing-related power demand if tariffs are enacted. Vietnam appears most at risk.

Heo emphasized that Vietnam exports USD $70 billion worth of computers and electronics to the U.S. annually. With 90% of Apple’s wearables and nearly half of Samsung’s export goods produced in Vietnam, any new tariffs could deter foreign manufacturers, decrease output, and subsequently reduce electricity consumption.

Tariffs may also drive up fuel prices in ASEAN countries, pushing electricity costs higher. Vietnam is particularly exposed due to its expanding LNG imports and weakening currency, raising the risk of foreign exchange losses and pressuring utility profit margins—potentially stalling the nation’s energy transition.

Overall, the research team at S&P Global believes U.S. tariffs could significantly affect power demand and solar manufacturing in Vietnam, Thailand, and Malaysia. The clean energy supply chain may shift, and energy developers could face increasing risks in procurement and cost structures.

Despite the uncertainties surrounding U.S. tariff outcomes, Cecillia Zheng recommended that companies monitor these three key developments:

1. How will evolving tariff policies influence energy firms’ investment decisions?
2. How can companies balance cost competitiveness while securing resilient supply chains?
3. In the face of protectionist measures like the April tariffs, how can energy companies use regional or global partnerships to build effective buffers?

Allen Wang, Executive Director of the research team, concluded that cautious market sentiment is slowing short-term energy investments. He noted that the prospects for other clean energy sources, such as geothermal, remain difficult to assess under the current uncertainty.