Are Tariffs Undermining America's Battery Supply Chain?
By Tanya Venkatesh, June 14 , 2025
U.S. tariffs on batteries are slowing clean energy progress and increasing costs. This threatens to delay the shift to electric vehicles and renewable energy.
Tariffs are intended to reduce foreign dependence and stimulate domestic production, but in practice, America’s tariffs targeting battery components like lithium-ion batteries and critical minerals are creating near-term obstacles that threaten to slow battery manufacturing and deployment in the United States. The current administration’s trade policy intends to achieve long-term security and independence—but at a steep short-term cost to climate progress and investment certainty.
Batteries: The Backbone of the Clean Energy Transition
Batteries play a foundational role in the shift to clean energy. With lithium-ion battery prices falling nearly 90% over the past decade, they are essential in replacing internal combustion engine (ICE) vehicles with electric vehicles (EVs) at scale and ensuring the stability and flexibility of the country’s electric grid. From supporting solar power integration to maintaining grid reliability during extreme weather events, batteries enable a more resilient and responsive energy system. They also help homeowners store energy and ease grid pressure during peak hours, advancing national goals of energy independence and long-term sustainability.
The United States remains far from achieving a self-sufficient battery supply chain. While domestic battery cell manufacturing capacity surpassed 200 GWh in 2024 and is projected to meet national demand by 2035, critical upstream dependencies persist. China, by contrast, produces over 3,000 GWh of battery capacity annually—more than the rest of the world combined—and dominates the processing of essential materials like cobalt, nickel, and graphite. In 2023 alone, nearly 88 percent of U.S. lithium-ion battery imports came from China, underscoring the scale of dependence. The U.S. also depends on allies such as Canada and Mexico for key imports, such as steel and aluminum that are used in EVs and power transformers. Despite strong support for the battery industry through the Inflation Reduction Act and a surge in domestic investment, these foreign dependencies continue to pose strategic vulnerabilities in the near to medium term.
Tariffs and Supply Chain Strain
Recent tariffs on Chinese battery imports are placing significant strain on U.S. battery deployment efforts. Grid-scale batteries, once expected to account for the majority of new electricity capacity additions in 2025, are now projected to face a 30 percent reduction in capacity growth—a direct result of supply chain disruptions and rising costs. This is particularly concerning for states like Texas and California, where batteries have proven essential in preventing blackouts during extreme weather events.
Industry leaders have voiced growing frustration. Abigail Ross Hopper, President of the Solar Energy Industries Association, remarked that “duties on [solar] cells make no sense when there is negligible cell production in the United States.” The same logic applies to batteries: while Tesla’s factories in Texas and Nevada signal future domestic capacity, they are not yet operating at scale. In the meantime, the U.S. remains heavily reliant on China, which controls over 60 percent of global battery production. As a result, project delays, supply bottlenecks, and price volatility are likely to persist, posing a serious challenge to the pace and resilience of the clean energy transition.
Environmental and Strategic Trade-offs
While the push to localize battery supply chains is often framed around national security and economic resilience, the environmental implications of this shift deserve closer scrutiny. Batteries produced in North America or Europe generally have lower lifecycle emissions than the global average, but this isn’t universally true. Chinese provinces like Yunnan and Sichuan—powered largely by hydroelectricity—already rival Western benchmarks in lifecycle emissions due to cleaner grids and mature infrastructure.
This presents a critical trade-off: even if imported batteries carry slightly higher emissions, delaying their deployment could result in greater environmental harm. Grid storage and EV adoption are time-sensitive levers in the decarbonization effort. A supply shortage—exacerbated by tariffs—risks slowing clean energy deployment and prolonging dependence on fossil fuels.
There are also economic and environmental costs to duplicating supply chains. Building parallel domestic infrastructure may enhance resilience, but it often requires more raw materials, energy, and emissions in the near term. Extracting, transporting, and assembling battery components across multiple geographies—without clear efficiency gains—can dilute the environmental benefits of clean technologies. In short, the path to resilience must be weighed carefully against the risk of losing momentum in the race to decarbonize.
Potential Workarounds—and Their Limits
India has emerged as a promising alternative to help ease U.S. supply chain constraints, particularly in the solar sector. Thanks to relatively modest U.S. tariffs on India (26 percent) and expanding manufacturing capacity throughout the country, Indian exports of solar cells and modules to the U.S. surged to 9.4 gigawatts across 2023 and 2024—up from negligible levels in prior years. One billion dollars in government subsidies aimed at scaling domestic solar production could further strengthen India’s role in this space.
However, the picture is less clear when it comes to batteries. India is focused on meeting its own climate goals, including a net-zero emissions target by 2070, and is investing heavily in electrifying its transportation sector. This domestic shift is expected to significantly increase India’s demand for lithium-ion batteries, potentially limiting the volume available for export.
Even if India can provide short-term relief, it does not address the deeper structural challenges posed by tariffs: constrained capacity, extended timelines, and ongoing policy uncertainty.
Policy Volatility and Investment Risk
Beyond the tariffs themselves, inconsistent trade policy compounds the challenge. The 10 percent reciprocal tariffs introduced by the administration, then paused for 90 days, have added a layer of unpredictability to an industry already constrained by long lead times and high capital requirements. One energy transition consulting firm reported that a 2 percent rise in interest rates could increase the cost of renewable power by 20 percent. For firms attempting to plan multi-year infrastructure projects, fluctuating policy poses a real barrier to investment.
Some solar firms, better prepared from past rounds of tariffs, have stockpiled up to 50GW worth of solar modules—enough of a cushion to weather near-term shocks. That is a luxury small and mid-sized players can’t afford. Over time, this may lead to industry consolidation, reducing competition and potentially raising prices for end users.
Conclusion
Tariffs are a blunt policy tool in the context of battery supply chains. While supporters of tariffs say they will catalyze investments in domestic manufacturing, their short-term consequences—higher costs, delayed projects, and supply disruptions—directly undercut national climate goals. Without significant parallel investments in industrial policy, infrastructure, and workforce development, tariffs alone are unlikely to deliver the supply security they promise.
Strategic trade enforcement will continue to be a vital component in protecting labor standards, national security, and fair competition. But for batteries—a technology that underpins decarbonization across transportation, energy, and construction sectors—policy must be guided by pragmatism. That means aligning trade actions with both supply chain realities and climate imperatives. In this sector, trade misalignments are more than a matter of inefficiency–they create missed opportunities that the country cannot afford to lose.
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