Trump Tariffs Threaten U.S. Battery Industry Growth | Shale Magazine

The demand for batteries in the United States is expected to continue growing year on year as more people purchase electric and hybrid vehicles and energy companies invest in utility-scale storage to make for a more stable renewable energy supply. However, the recent introduction of sweeping import tariffs by the Trump administration threatens to dampen the growth in the battery market as prices increase and domestic producers struggle in the face of economic uncertainty. 

Battery Imports

At present, the U.S. imports most of its lithium-ion batteries, with almost 70% coming from China. The U.S. imported $4 billion worth of lithium-ion batteries from China in the first four months of 2024 alone. This is because China dominates the critical minerals and battery production markets. China makes an estimated three-quarters of lithium-ion cells, 80% of the world’s cathode materials, and over 90% of anode materials. 

China has developed a world-leading battery manufacturing industry thanks to years of investment in mining for critical minerals, such as lithium, and significant expertise in manufacturing in general. While China ranks ninth in terms of lithium resources, it controls over 60% of global battery-grade lithium refining. 

A Shift Away from China

President Trump has repeatedly stated his intention to decrease the U.S. reliance on China, having launched a trade war and imposed substantial tariffs on Chinese goods during his first term in office. 

Since returning to office in January, Trump has threatened higher tariffs on China, going back and forth on just how high they might be. The growing uncertainty surrounding U.S.-Chinese trade relations is having a wide range of economic effects, as companies are fearful of investing in battery imports or materials for manufacturing that may later be hit with tariffs. 

Virginia-based company Fluence Energy, which buys, packages, and installs energy storage batteries, has reduced its annual revenue forecast by roughly 20%, citing a pause on U.S. projects under existing contracts and an indefinite hold on all pending contracts until there is more certainty on the tariff environment. John Zahurancik, Fluence’s president of the Americas, explained, “It’s not the absolute price that’s so much the issue as it’s the uncertainty around where the price will be.”

By May, Trump’s tariffs on China sent battery costs for U.S. buyers sky-high, after tariffs on Chinese batteries exceeded 150% in April. Several companies have stopped importing cells from China due to the soaring costs. The Trump administration temporarily lowered tariffs on China in mid-May, to 30%, although batteries face additional levies. Nevertheless, the uncertainty surrounding the future of tariffs has shifted the focus towards domestic battery production. 

Domestic Production

Between 2022 and 2024, U.S. investments in batteries and critical minerals refining increased by at least threefold, with battery manufacturing financing totaling $40.9 billion from quarter two of 2023 through quarter two of 2024. This was largely owing to government policies and incentives, particularly those introduced under the 2022 Inflation Reduction Act (IRA). 

Since President Trump retook office, he has doubled down on efforts to boost domestic manufacturing across a range of industries, which was a big part of the reason why he introduced tariffs on imports. However, the introduction of tariffs not only increases the cost of battery imports but also the materials needed to produce batteries domestically – from cells to critical minerals and general-purpose materials like steel and aluminum. The rising costs associated with manufacturing and the uncertain economic outlook are deterring companies from expanding domestic operations. 

In addition, Trump has often suggested that he intends to reduce or cut much of the financing set out in the IRA, which he has referred to as the “Green New Scam. Greatest scam in history, probably”. The Department of Energy Loan Programs Office, which has previously provided funding to several battery manufacturers, has scaled back or cut significant quantities of funding in recent months in line with Trump administration demands. 

The American Clean Power Association is tracking 25 major projects to build or expand domestic grid-scale energy storage facilities, with 11 already in operation or under construction. Most of the manufacturing capacity at these factories is for battery modules, suggesting that they continue to depend heavily on China for battery cells and other materials.

Ravi Manghani, the senior director of strategic sourcing at data analytics firm

Anza Renewables, stated, “The domestic supply chain is unfortunately going to be at the receiving end of the tariff.” Manghani added “A lot of the raw materials that would go into domestic batteries, as well as the manufacturing equipment you need to build these cell factories, are still slated to come from China. We don’t have a lot of alternatives yet.”

This demonstrates just how vulnerable the nascent U.S. battery industry is in the face of uncertain tariffs on key manufacturing components. The introduction of high tariffs on Chinese imports, as well as goods from other countries around the globe, will likely result in a reduction in battery imports over (at least) the next year, as well as a slowdown in domestic battery production. 

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