In his ongoing quest to both kill off the renewable energy sector and at the same time, punish China, President Donald Trump signed an executive order in early February imposing an additional 10% tariff on solar materials imported from China. Meanwhile, similar tariffs aimed at Canadian and Mexican energy goods have been temporarily deferred. This latest decision, layered atop tariff hikes initiated under former President Joe Biden, raises the cumulative duties on Chinese solar inputs—specifically polysilicon, wafers, and cells—to a steep 60%, all under Section 301 trade provisions.

This development has had a significant impact on China’s solar industry, which exports approximately 70% of its products to international markets, primarily the United States and the European Union. These expanded tariffs are expected not only to increase manufacturing costs but also to erode the competitive advantage Chinese producers hold in the U.S. market. Historically, China has responded to such tariff hikes by altering the documented origin of its exports—transshipping them through third countries to reach U.S. consumers. In turn, the United States has escalated enforcement through legislative measures, trade investigations, and tightened regulatory clauses.

On April 21, the U.S. Department of Commerce issued its final ruling on the “double-reverse” investigation concerning crystalline photovoltaic cells—whether assembled into modules or not—imported from Cambodia, Malaysia, Thailand, and Vietnam. The ruling imposed anti-dumping duties ranging from 6.1% to an extraordinary 271.28%, depending on the firm and country involved. Tariffs have been levied as high as 3521% for some solar products from these nations, effectively closing off one of China’s principal tariff-avoidance channels. As a result, Chinese solar companies are being forced to seek alternative markets to sustain export growth and defend their global market share.

In response to these developments, China has adopted a dual strategy of market diversification and production transfer. Market diversification entails expanding exports to regions such as Africa and the Middle East. However, penetrating these markets introduces new challenges due to varying environmental standards, regulatory frameworks, and political considerations. The production transfer strategy involves relocating manufacturing operations from Vietnam to countries such as Indonesia and Laos, in hopes of circumventing U.S. tariff enforcement. Yet, as Washington increases its regulatory vigilance, sustaining this maneuver becomes increasingly difficult for Chinese firms.

Among these alternative markets, the Middle East—especially the Gulf Cooperation Council (GCC) countries—presents a promising opportunity for China’s solar industry. The region offers a unique combination of high solar irradiance, rising energy consumption, and a strong political will to invest in renewable energy. However, China’s market exploration in the GCC remains at an early stage, despite a recent uptick in solar product exports to the region. Countries such as Saudi Arabia and the United Arab Emirates have launched ambitious national strategies—Saudi Vision 2030 and the UAE Energy Strategy 2050, respectively—that aim to diversify energy portfolios and reduce reliance on fossil fuels. Importantly, the political stability and economic openness of the GCC differentiate it from the wider Middle East, making the subregion a more viable and strategic gateway for solar expansion.

China has already begun to ramp up its solar exports to the GCC, but persistent tariff barriers and local regulations continue to limit their potential. Furthermore, several GCC states, most notably Saudi Arabia, have introduced stringent localization policies that include anti-dumping duties and mandates for foreign firms to establish local enterprises and hire local labor. These measures constrain the effectiveness of pure export models and highlight the need for deeper regional integration.

To maintain market access and mitigate the impact of U.S. restrictions, Chinese solar companies must consider forming strategic joint ventures within the GCC. Such partnerships align with localization requirements while offering stable, long-term access to growing energy markets. These ventures also create employment opportunities for local populations and provide infrastructure for regional supply chain integration. For example, the Saudi Aramco–DHL supply chain hub exemplifies how foreign collaboration can contribute to local development while serving as a platform for expanded exports to Africa, Europe, and Asia. Joint ventures offer Chinese firms a pragmatic path to sidestep punitive tariffs and solidify their role in the evolving global solar ecosystem.

Nonetheless, many Chinese solar companies continue to rely on direct exports due to the lower initial costs and faster market entry. However, this approach faces clear limitations—particularly in securing large-scale projects, which are often overseen by sovereign wealth funds or entities with close ties to GCC leadership. Consider the 2-gigawatt Al Dhafra Solar Project in Abu Dhabi, which was awarded to a consortium comprising China’s JinkoSolar, France’s EDF, and the UAE’s TAQA, with local firms holding a 60% stake. This reflects the regional emphasis on domestic ownership and collaboration, especially in high-profile developments. The implication is that joint ventures in the GCC typically require a partnership structure that grants local firms majority control, thereby limiting China’s operational autonomy in these ventures.

A more ambitious—but also more resource-intensive—alternative for Chinese firms is full localization. This strategy involves establishing independent operations within the GCC, which would provide direct access to national markets and align fully with local policy mandates. While full localization offers the greatest potential for long-term gains, it demands substantial upfront investment and a prolonged timeline for return on capital. Given that cooperation between China and the GCC in the solar sector remains in its early stages, many Chinese companies remain cautious about embracing such a high-risk approach.

Taking these dynamics into account, joint ventures currently offer the most balanced and feasible strategy for Chinese solar firms entering the GCC market. This model accommodates regional localization policies, reduces exposure to trade sanctions, and provides a foundation for sustainable growth across the region.
Though U.S. tariffs present a formidable challenge to China’s solar industry, they also catalyze a broader search for new strategic partnerships and geographic realignment. By deepening engagement with the Gulf states through joint ventures and localization, Chinese solar companies have the potential to withstand geopolitical headwinds while contributing to the global shift toward renewable energy. As the international solar landscape evolves, the ability to adapt to regional constraints while seizing emergent opportunities will be critical for China’s continued leadership in clean energy innovation.

Special thanks to Dr. Mohid Iftikhar for his valuable guidance and thoughtful suggestions throughout the development of this research.