This paper analyzes the effect of Islamic trade agreements on the solar panel manufacturing sector in the South Asian region, paying particular attention to the mediating role of tariff reduction policies within the manufacturing sector. Achieving a trade agreement compatible with a developing region’s economy is crucial as it offers a comprehensive understanding of the impact the agreement has on green industries. The study employed a quantitative approach where data was collected from 421 valid respondents representing pertinent stakeholders from the manufacturing industry. Structural equation modeling was utilized to assess the direct impacts that Islamic trade agreements have on manufacturing performance and the indirect impacts that are mediated through tariff reduction policies. The results indicate that solar panel manufacturing under Islamic trade agreements is favorable, due to policies on tariff reductions providing significant mediating effects by promoting constructively lower trade barriers and greater cooperation among businesses from different nations. The research demonstrates the need for policy coherence to enable the growth of renewable energy manufacturing sectors within Islamic economic frameworks in South Asia. This study aims to assist policymakers and industries build sustainable developmental plans to restructure trade and tariff policies for more sustainable industrial growth.
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