US slaps 126% solar tariff on India amid trade deal friction

US slaps 126% solar tariff on India amid trade deal friction

The Trump administration has imposed a preliminary countervailing duty (CVD) of 125.87% on solar cells and modules imported from India. The decision, announced by the US Department of Commerce on February 24, effectively renders the US market economically unviable for Indian solar manufacturers. This protectionist measure comes despite a bilateral trade framework signed earlier this month intended to lower tariffs on Indian exports to 18%.

What we know now

On February 24, 2026, the US Department of Commerce issued affirmative preliminary determinations in its anti-subsidy investigations. The investigation, which began in August 2025, concluded that Indian exporters benefited from government subsidies that undercut domestic American producers.

• Tariff Rate: 125.87% (General Rate).

• Affected Nations: India, Indonesia (86%–143%), and Laos (81%).

• Final Determination: Scheduled for July 6, 2026.

Key details: The "Adverse Facts Available" penalty

The steep 126% rate is largely attributed to the "Adverse Facts Available" (AFA) methodology—the toughest penalty used by US authorities. This was triggered after two mandatory respondents, Mundra Solar Energy and Mundra Solar PV (both Adani Group companies), withdrew from the investigation in November 2025.

• Allegation: Mandatory respondents withheld requested information and failed to meet deadlines.

• Subsidies cited: Advance Authorisation, Duty Drawback, and the RoDTEP scheme.

• Volume Surge: Indian exports to the US rose from $83.8 million in 2022 to over $792 million in 2024.

Context: The China-link and trade friction

The US investigation alleges that the Indian solar industry remains heavily reliant on Chinese inputs. US manufacturers, represented by the Alliance for American Solar Manufacturing and Trade (AASMT), argue that Chinese firms have shifted production to India to circumvent direct US-China tariffs.

This move creates a significant structural bottleneck for the India-US trade deal, which had initially aimed to cut baseline tariffs to 18%. Officials from both nations have reportedly postponed a high-level meeting scheduled for this week to study the implications of recent legal and administrative tariff pivots.

Impact: Stock market reaction and industry pivot

The announcement triggered an immediate sell-off in Indian renewable energy stocks on February 25.

• Waaree Energies: Plunged up to 15% before paring losses.

• Premier Energies: Hit its 10% lower circuit during intraday trading.

• Vikram Solar: Dropped as much as 7.8%.

Despite the volatility, firms like Waaree Energies claim insulation through localized US manufacturing facilities, currently totaling 4.2 GW in capacity. Premier Energies noted that its export exposure has already been reduced to "almost nil," shifting focus to India’s domestic 500 GW renewable energy target.

What next

Exporters now face a six-month window before the final determination on July 6, 2026. Concurrent "anti-dumping" investigations are also underway to determine if Indian panels were sold below the cost of production, which could add further duties.

Bigger signal

The 126% tariff is a "Forensic Bear Case" for pure Indian exporters. It highlights that strategic bilateral deals are secondary to sector-specific protectionism in the current US administration. While the Indian domestic market can absorb capacity in the long term, the immediate closure of the US market—which accounts for nearly 97% of India's PV exports—will force a painful and rapid pivot to European and African markets.

FAQ

1. Is the 126% tariff final? No, it is a preliminary determination. A final decision is expected by July 6, 2026.

2. Why is the rate so high? US authorities applied the "Adverse Facts Available" penalty due to non-cooperation by mandatory respondents.

3. Which companies are most affected? Pure exporters like Waaree Energies and Adani-owned Mundra Solar face the highest risk.

4. Will this end the India-US trade deal? The deal remains in a state of "lack of clarity" as officials study the implications of this and other tariff pivots.

5. How can Indian firms mitigate this? By expanding local manufacturing within the US or pivoting to domestic Indian demand.

6. Are other countries affected? Yes, Indonesia and Laos were also hit with duties ranging from 81% to 143%.