A new wave of US tariffs has prompted swift diplomatic and economic manoeuvring across Southeast Asia, with analysts warning of potential disruptions to the region’s clean energy trajectory just as solar and wind deployment gains momentum, Reccessary writes.

In April, when US President Donald Trump announced steep import tariffs targeting a swathe of sectors, reigniting concerns among many ASEAN countries that have flourished under the China+1 strategy – wherein companies diversify production beyond mainland China.

Yet while some see the move as a threat to Southeast Asia’s growing green economy, others suggest it could accelerate domestic energy resilience, especially in solar and wind power.

Solar strength

In 2023, ASEAN’s solar capacity reached approximately 34 GW, led by Vietnam with 18.4 GW, Thailand far behind in second place with 3.6 GW and Malaysia with 1.8 GW, according to the International Renewable Energy Agency (IRENA).

Wind power by contrast, while much less developed, is also gaining ground and only Vietnam can claim to host over 4 GW of onshore and offshore wind capacity, making it the region’s front-runner.

This backdrop forms the stage for a potential turning point. At a recent S&P Global Commodity Insights webinar, analysts explored the ramifications of US tariffs on clean energy investment across ASEAN, particularly in solar development.

Stricter US trade rules have already affected Chinese production lines and are beginning to erode the value-added exports of ASEAN countries, Cecillia Zheng, an analyst for natural gas, power, and climate solutions at S&P Global was reported as saying. Zheng also highlighted electronics, automotive, machinery, and clean energy, in particular solar, as sectors now facing heightened tariff pressure.

Vietnam, Thailand, and Malaysia together exported nearly 30 GW of solar modules and cells to the US in 2023, with a combined value exceeding $9.5bn the report continues.

Opportunities in oversupply

Despite the uncertainty, however, falling solar costs may cushion the blow. Chinese solar manufacturers have ramped up production, leading to global oversupply, Vince Heo, S&P Global analyst said. This has largely offset post-pandemic inflation as well as keeping capital expenditures for utility-scale solar projects stable, or even pushing them down across Southeast Asia, he added.

Heo went on to add that the cost of electricity from onshore wind and solar in Vietnam is now lower than coal-fired power. Solar-plus-storage, once prohibitively expensive, is also trending downward, Reccessary says, and may reach price parity with coal within two to three years in what would be a shift likely to influence the energy procurement strategies of industrial users; coal has for decades been a significant part of energy production and supply in the country.

And should the US enforce anti-subsidy and anti-dumping tariffs as appears increasingly likely, it could even lead to a redirection of low-cost solar modules and storage systems into the ASEAN region, he went on to say. In this scenario, the Philippines with its relatively open electricity market and policy support, would stand to benefit, Heo adds.

Vietnam’s energy transition at risk

However, the tariff-induced realignment also poses a number of considerable risks. ASEAN countries, in particular Vietnam in recent years, are deeply entwined with US trade flows. A reduction in exports could dampen manufacturing output and, by extension, power demand.

At present, Vietnam exports around $70bn in computers and electronics to the US annually. As such, any significant drop in output would mean less electricity consumption and in turn this would likely affect the ongoing energy transition and shift to renewables – nuclear included – across the country.

Rising fuel prices could also increase electricity costs in the region. Vietnam, increasingly reliant on LNG imports in the past two years, is particularly exposed due to currency depreciation risks and shrinking utility margins because of recent energy policy shifts.

Shifting supply chains

S&P Global analysts also caution that solar manufacturing and energy development in Vietnam, Thailand, Malaysia and indeed across ASEAN may face rising procurement and cost risks as global supply chains shift.

Still, some observers argue that protectionist trade policies might just nudge ASEAN nations towards greater self-sufficiency and stronger regional cooperation. There are already increased signs of this happening with bilateral and trilateral agreements having been put in place in the past few months on power supply issues across nations including Laos, Cambodia and Thailand as well as Vietnam.

As such, the clean energy sector may adapt more quickly than anticipated.

To this end, while the region must and is grappling with the immediate fallout of the April tariff announcement by President Trump, the longer-term picture remains unsettled.

For ASEAN as a whole, the challenge lies not only in weathering near-term headwinds but also in harnessing them to fortify its energy future. Even several years ago this would have been much harder but today with solar and wind ever more affordable and as demand for resilient energy systems rises, the region's energy transition may just stand it in good enough stead to take on Washington – and win.