American solar installers have stopped doing business with China-backed U.S. production centers due to uncertainties about their products' eligibility for government subsidies

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Key Takeaways:

  • China-linked U.S. solar panel makers may be ineligible for U.S. subsidies aimed at supporting residential-based solar power, according to a Reuters report
  • JinkoSolar is selling 75.1% of its U.S. plant in Florida to an American private equity company in an apparent attempt to keep its products eligible for subsidies

As Donald Trump prepares to visit China later this week to meet with President Xi Jinping, U.S. protectionist measures against Chinese products are likely to be one of the top items on the agenda. An important part of that discussion could focus on solar energy products, not only ones produced in China but also ones made at Chinese-invested plants in the U.S.

That issue was a central element in a Reuters report last Friday, which revealed that U.S. solar installers, as well as insurance companies and banks, have stopped doing business with China-invested U.S. solar module makers. That includes companies like leading residential solar installer Sunrun (NASDAQ:RUN), which has stopped buying panels from U.S. plants with links to Chinese companies.

In what looks like a direct response to that challenge, leading Chinese panel maker JinkoSolar Holding Co. Ltd. (NYSE:JKS) (688223.SH) has agreed to sell 75.1% of its U.S. plant in Florida to private equity company FH Capital, according to an announcement from FH Capital the same day as the Reuters report. JinkoSolar would retain the remaining 24.9% in the factory in the city of Jacksonville, which began operations in 2018.

The size of the stake sale is quite revealing, since legislation passed by the U.S. last year, with strong backing from the Trump administration, sharply cut subsidies for residential solar installations, and placed restrictions on subsidies that remained. One restriction prohibited subsidies for any installations using panels produced at factories that were more than 25% owned by Chinese companies.

"We believe this transaction provides the right ownership, management and strategic direction for this new venture to grow capacity and serve the growing demand for high performance U.S.-sourced renewable energy products," said JinkoSolar U.S. general manger Nigel Cockroft. The two sides added that following the deal, they plan to at least double capacity at the plant, currently at 2 GW annually, and also start producing energy storage systems.

JinkoSolar rival Longi (601012.SH) also recently reduced its stake in its U.S.-based production joint venture in the state of Ohio to below 25%, according to the Reuters report. Other Chinese companies facing similar exposure from their U.S.-based factories include Trina (688599.SH), JA Solar (002459.SZ) and Canadian Solar (NASDAQ:CSIQ).

Not surprisingly, China has criticized the restrictions, calling them discriminatory, according to the Reuters report, citing a spokesperson for the Chinese embassy in Washington.

Investors applauded the latest move by JinkoSolar, whose shares rose 5.3% on Friday after the announcement. The stock is up 30% over the last 52 weeks on hopes for a recovery for the embattled sector that has suffered for more than a year due to huge overcapacity built up over the last three years.

Signs for such a recovery look broadly positive, as the sector gains fresh momentum from the U.S. and Israeli war against Iran, which has sent oil prices to multi-year highs and underscored the need for more reliable energy sources. Even before that, solar module and panel prices were showing signs of stabilizing after more than a year of declines, as Chinese producers shut down older, more obsolete capacity under encouragement by Beijing.

Low value-added facilities

While the sale of majority stakes of their U.S. plants may help Chinese companies avoid the restriction limiting their stakes to less than 25%, the reality remains that these plants are quite low tech and not really the kinds of facilities the Trump administration wants to attract. That's because the facilities are mostly involved in final module assembly, with most or all of their key components imported from China.

Accordingly, we wouldn't be surprised to see the Trump administration call for the Chinese to move more high-tech manufacturing to these facilities as a condition for making their products eligible for subsidies. That could prove tricky, as Beijing has signaled it may try to restrict Chinese companies from exporting their most cutting-edge technology to foreign-based plants – even though it imposed the same requirement on many foreign companies that came to China in the past.

In terms of its business, JinkoSolar got about one-fifth of its sales last year from the Americas, according to its 2025 annual report, which didn't break down the amount by country. But the U.S. is probably its main market in the region, perhaps accounting for around 15% of the company's total sales. The importance of foreign markets like the U.S. is also likely to grow this year as China sharply slows its spending on new solar installations after several years of massive additions that made the country home to more than half of the world's installed capacity.

The U.S. tensions are also significant because other markets, most notably the EU and India, have expressed their own frustrations at China and have taken similar steps in the past.

These issues have been years in the making, and we doubt things will be solved overnight during Trump's visit to Beijing. But at least the leaders can exchange views directly to better understand the other side's concerns. China has already shown some willingness to consider the Western point of view with its recent cancellation of a yearslong policy that exempted Chinese solar manufacturers from paying some value-added tax for products they exported.

Meantime, JinkoSolar and its peers, despite the numerous headwinds they've faced over the last year, continue to show signs of a rebound.

JinkoSolar reported late last month that its revenue fell 11.5% in the first quarter of this year, which marked an improvement from the 15% decline in the fourth quarter and 34% plunge in the third. More importantly, the company's gross margin rebounded to 8.3% after hitting a low of just 0.3% in the previous quarter. As its situation improves, the company reported an adjusted net loss for the latest quarter, which excludes certain non-cash items, of 549 million yuan ($80.7 million), marking a big improvement over its 1.07 billion yuan loss a year earlier. 

While its massive losses and thin margins don't look too impressive on the surface, the trends look broadly positive for a recovery over the next year or two. Now, Beijing needs to work at the more macro level to create favorable conditions for its solar companies to export some of their expertise to reduce or eliminate some of the geopolitics that have plagued the industry over the last few years.

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