Canadian Solar (CSIQ) saw its stock plummet 5.14% in pre-market trading on Tuesday, as the U.S. solar energy sector faces a potential setback from proposed changes to tax legislation. The drop comes amid a broader selloff in solar stocks, triggered by modifications to President Donald Trump's tax-cut and spending bill.

Republicans controlling the U.S. Senate Finance Committee have unveiled changes that would phase out solar, wind, and energy tax credits by 2028. This move has sent shockwaves through the solar industry, with several major players experiencing significant pre-market declines. While Canadian Solar is not a U.S.-based company, it is heavily involved in the U.S. solar market and is likely to be impacted by these potential changes.

The proposed legislation, part of Trump's "One Big Beautiful Bill Act," also extends tax credits for hydro, nuclear, and geothermal power to 2036. This shift in policy could potentially reshape the competitive landscape of the renewable energy sector, putting solar companies at a disadvantage. The news comes at a challenging time for the U.S. residential solar market, which is already grappling with weak demand due to high interest rates and recent metering reforms in California, a key market for solar energy.