Summary
Chinese solar companies, which control over 80% of the global solar market, have long avoided U.S. duties by shifting production to Southeast Asia.
Over 80% of U.S. solar imports now come from nations like Malaysia and Vietnam, but new U.S. tariffs are expanding to these regions.
In response, Chinese firms are exploring manufacturing in the Middle East.
Analysts say such measures expose the challenges of reducing U.S. reliance on China’s solar supply chain.
If it becomes more expensive to buy products manufactured in certain countries then customers would naturally change their buying habits to other companies. The price to the customer ultimately acts as an incentive to companies.
This only works if there is enough supply from those other companies. This also assumes that the other companies have a supply chain that isn’t affected by tariffs. Which means each step on the chain needs to produce enough to be a reasonable alternative to tariffed imports.
True, but even if there’s only one supplier, there’s still demand-side elasticity of price, which means that price increasing causes some customers to not buy the product. Thus, a company may or may not be able to increase a price 1:1 with the tarriff.
All this is fun economic theory, but I was specifically responding to the claim that tax incentives were better than a tarriff. They both translate into some increase in cost of the goods sold.