President Biden’s administration has now taken measures to reduce the dependance on import of batteries and battery components from China.
The White House said the US administration would increase the tariff rate on lithium-ion batteries for electric vehicles (EVs) from 7.5% to 25% in 2024, and the tariff rate for non-EV lithium-ion batteries from 7.5% to 25% in 2026. The tariff rate for battery parts will also increase from 7.5% to 25% in 2024. Tariffs for natural graphite and permanent magnets will go from zero to 25% in 2026 and tariffs for certain critical minerals will go from zero to 25% in 2024.
According to the Biden administration, concentration of critical minerals mining and refining capacity in China leaves the domestic supply chains vulnerable and leaves the national security and clean energy goals at risk. In order to improve US and global resiliency in these supply chains, President Biden has invested across the US battery supply chain to build a sufficient domestic industrial base. About 70% of the EV battery supply chain relies on China, according to Morgan Stanley.
Through the Bipartisan Infrastructure Law, the Defense Production Act, and the Inflation Reduction Act, the Biden-Harris Administration has invested nearly $20 billion in grants and loans to expand domestic production capacity of advanced batteries and battery materials.
The Inflation Reduction Act also contains manufacturing tax credits to incentivise investment in battery and battery material production in the US. The President has also established the American Battery Materials Initiative, which will mobilise an all-of-government approach to secure a dependable, robust supply chain for batteries and their inputs.
The 2026 date gives BESS manufacturers an extra two years to source US-made cells to protect themselves from the new 25% tariff. BESS manufacturers were already looking at ways to secure local cell capacity before this announcement, in order to take advantage of a domestic content tax credit for BESS projects and a generous $35 per kWh of battery cell production. The new tariff provides a huge additional reason to do so, by increasing the cost of Chinese batteries by nearly a fifth.
There are several reasons to the action taken by the US President, for example stating an example of protecting jobs in the USA. The website www.investors.com concludes the situation as follows: “That weakness in the Yuan, also called the Renminbi, gives China-made goods a competitive edge over inflation-plagued regions, led by the US. In addition, it makes goods imported into China comparatively expensive, driving down China’s demand for imports. The combination has ramped the US/China trade imbalance higher.”
However, the action might have a minor impact on some battery products. Even without the increased tariff, consultancy Clean Energy Associates recently estimated that US-made BESS products were set to become cost-competitive with those from China next year. The news led to a rally in shares of solar power companies.
