Liberation Day Tariff Gift: Will India Cash in or Miss the Moment?

As expected, the US fired its much feared tariffs salvo on April 2 at its trading partners across the board. But here is the twist: Far from singeing India, the tax offensive may in fact turn out to be Donald Trump’s surprise Liberation Day gift to his “good friend” Narendra Modi. A gift that catapults the country to the front row of America’s nearly $15 billion market for solar modules--if it moves quickly and plays its cards well.   

With a tax advantage of 8% to 20% over its principal Asian rivals and manufacturing powerhouses China (34%) and Vietnam (46%), India could arguably price out its competitors from the American solar modules market, disrupting the usual pecking order in the sector.

For evidence, consider this:

In 2024, the US imported solar modules worth $12.4 billion from Vietnam, Thailand, Malaysia and Cambodia alone. With the latest tariff reset, India, with a tax load of 26%, enjoys a significant advantage over all those economies except Malaysia.

Given that the US sourced just 4.7% of its solar module imports from India, totaling about $2 billion, in 2024, the tariff advantage represents a rare and potentially game-changing opportunity for India to break into the world’s most valuable export market. A detailed product by product tariff rate chart to be released on April 9 will define the numbers more precisely, but preliminary analyses show that India’s price advantage could be significant.

India’s Time to Shine

"Looking at the broader numbers, we're certainly ahead of our competitors at the moment, giving us a clear opportunity to boost exports, across the renewable energy space and particularly in the solar sector to the US," says Amit Paithankar, CEO of Waaree Energies, a leading manufacturer and exporter of solar modules. "US demand is extremely strong—currently at around 50 gigawatts per annum—and there are several factors indicating it will continue to grow."

In a recent press briefing the Ministry of New and Renewable Energy announced that India's solar module manufacturing capacity has nearly doubled from 38 GW in March 2024 to 74 GW in March 2025. The growth of PV cells production has been even more remarkable, tripling from 9 GW to 25 GW. While the current policy ecosystem in the country is supportive of domestic solar manufacturing, to capitalise on the opportunity presented by the Trump tariff advantage India must dramatically expand its production capacity. This will involve all stakeholders across the value chain—not just policymakers.

But, What Holds India Back?

According to a report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research, the value of Indian exports was five times higher in FY2023 than FY2022. This was primarily due to two reasons – an already sizeable module manufacturing capacity and, more importantly, the restrictions imposed on Chinese goods by other countries. However, these advantages are, to an extent, offset by India’s excessive reliance on imports. The country manufactures solar modules essentially with imported ingots-wafers and polysilicon, which drives up the costs.

As of November 2024, Chinese TOPCon solar modules were priced at around $0.087 per watt, compared to $0.24 for Vietnam and a significantly higher $0.30 for India-made modules, according to OPIS Solar Weekly, which tracks energy market data and insights.

In other words, currently, China and, to a lesser degree, Vietnam enjoy a clear price advantage. However, in the aftermath of the new US tariffs, the gap is likely to be erased. In fact, once the taxes load up, India could emerge with a significant cost advantage.

How Can India Seize the Opportunity?

However, if India aspires to emerge as a dominant exporter on not just the American but on the global stage, it simply cannot rely upon tariff-led price advantages alone (which are often fickle). Instead, it must relentlessly increase capacities, optimise efficiencies and minimise costs by investing in infrastructure and innovation.

The recently inaugurated 2 GW ingot-wafer manufacturing facility is an encouraging step forward. So is the ‘National Manufacturing Mission,’ unveiled by the government in the 2025 Union Budget. The mission aims to boost India’s manufacturing ecosystem for solar cells and modules with a slew of steps such as waiving customs duties on critical minerals, many of which are essential for solar cell manufacturing. Much more needs to be done to establish the country as a manufacturing and exporting powerhouse that can hold its own irrespective of tax incentives.

Notes the Waaree CEO: “The entire value chain should be controlled within India. While some parts and components could be sourced through collaborations with friendly countries, everything else needs to be developed and produced domestically.” Adds Ajay Srivastava, Founder of Global Trade Research Initiative (GTRI) “Though solar companies are gaining expertise, on costs they struggle to match China, which not only subsidises its manufacturers but also boasts formidable technological muscle.”

In the medium term, however, until India scales its manufacturing to the required levels, it would have to continue importing a large share of the inputs it needs to make solar modules from countries across the world. This necessitates robust and reliable supply chains. Says Paithankar at Waaree: “Having good relations with them is important so that components of the required quality are delivered on time.” He adds that the entire ecosystem – from civil construction to electrical instrumentation—must function like a well-oiled machine. Equally, processes like land allotment, certifications and environmental clearances, need to be fast-tracked.  “At the end of the day we have to be globally competitive,” he adds.

From a labour cost perspective India is better placed compared to most peers. But when it comes to the intellect required for research and cutting edge technology development, India is yet to harness its formidable potential. “That would be a key differentiator for gaining long-term competitive advantage,” says Paithankar. To lead the race India must not only develop new manufacturing technologies but take them to market. Achieving this will require enhanced industry participation in R&D programmes.

"Adopting technology from developed countries is expensive due to patent and other associated costs, making it prohibitive for the end consumer,” says Vibhuti Garg, Director for South Asia at IEEFA. “We should definitely develop the technologies indigenously and spend more on R&D.”

Currently, concerns persist over the quality of India-made panels, even as the country falls behind global leaders like China. For example, China is shifting from the traditional PERC (Passivated Emitter and Rare Contact) Technology to TopCon (Tunnel Oxide Passivated Contact) and HJT (Heterojunction Technology). However, in India, manufacturers still use the PERC technology.

This technological lag spotlights an underlying challenge: while India’s tariff-led advantage is real, it will remain fragile unless it is accompanied by progress on all fronts including quality and innovation. The challenges are well known—supply chain dependencies, outdated technology, and limited domestic innovation—but so is the path forward. It is to be seen whether India will miss the moment. Or, will it use the disruption to leapfrog entrenched rivals and do justice to Friend Trump’s unexpected tax gift.