US polysilicon price floor plan targets China's 80% solar grip

The US government plans to announce floor prices and additional tariffs on polysilicon imports under Section 232 later this month, a hybrid approach targeting China's roughly 80 percent share of global solar manufacturing capacity.

"China urges the US to stop the Section 232 tariff measures as soon as possible and properly resolve concerns of all parties through equal dialogue," the Chinese Embassy in Washington said.

The Commerce Department launched the Section 232 national security investigation on July 1, 2025, with a public comments notice on July 16. The department's report is expected around May 2026, with a presidential decision now pushed to August 2026. The hybrid approach would set minimum import prices on polysilicon while imposing additional tariffs on derivative products, though importers of silicon wafers and batteries that invest in US facilities could offset some costs.

The measures aim to protect Hemlock Semiconductor's Michigan plant and Wacker Chemie's Tennessee facility, the primary US producers. Higher polysilicon costs would raise input prices for downstream US solar panel manufacturers and semiconductor producers, potentially extending payback periods on installations, while Chinese producers face higher export barriers.

The Section 232 mechanism carries precedent. The first Trump administration used the same legal tool in 2018 to impose tariffs on steel and aluminum imports, granting the president broad authority to restrict imports deemed a threat to national security. That round triggered retaliatory measures from China and the European Union, and the current investigation could produce a similar response.

Two Supply Chains, One Material

Polysilicon serves two distinct supply chains. Solar-grade polysilicon is refined into wafers for photovoltaic panels, while electronic-grade polysilicon, refined to even higher purity, feeds semiconductor manufacturing. China dominates both segments of global supply, leaving US producers — Hemlock Semiconductor and Wacker Chemie — with a thin domestic footprint. REC Silicon, which operated in Washington State, has faced significant operational challenges.

The price floor mechanism, first proposed in January 2026 for critical minerals and detailed further by Vice President JD Vance in February, would trigger adjustable tariffs when global polysilicon prices fall below a set threshold. If Chinese producers flood the market with cheap supply, tariffs would automatically adjust upward to keep the effective US price above a minimum level. For domestic producers, the floor provides revenue certainty that could justify capacity expansion investments. For downstream US manufacturers, it raises input costs.

The Inflation Reduction Act, passed in 2022, poured billions into incentivizing domestic solar manufacturing and clean energy deployment, and the administration's polysilicon push is partly an attempt to make those ambitions achievable. But the trade-off is direct: more expensive panels mean longer payback periods on installations, and some projects that pencil out today might not pencil out tomorrow.

Sector Fallout Already Visible

The impact is already visible in the sector. XINYI SOLAR reported first-half 2026 net profit of RMB39.016 million, down 94.8 percent year over year, with its interim dividend cut to HKD0.23 cent per share. Chinese manufacturers controlling the bulk of global solar capacity face higher export barriers, while US-based producers benefit from the protection.

The investigation's outcome is not binary. The president could impose blanket tariffs, targeted tariffs, quotas, or a combination with exemptions. Each scenario produces different winners and losers across the solar and semiconductor value chains, and the Commerce Department's plan to allow cost offsets for importers investing in US facilities creates differentiated competitive impacts across the sector. The announcement later this month will clarify which path Washington intends to take, with the final presidential decision expected by August 2026.

This article is for informational purposes only and does not constitute investment advice.