The U.S. battery sector faces significant challenges that could impede its growth, particularly as the demand for energy storage rises with the push for renewable energy. A major issue is the increasing reliance on lithium iron phosphate (LFP) batteries, largely sourced from China. While LFP batteries are cost-effective and safe, trade tariffs imposed by both the Trump and Biden administrations threaten to increase prices. BloombergNEF (BNEF) projects that tariffs could drive battery costs up by 17.5% by 2026, putting further strain on U.S. energy storage expansion.
Other observations:
- Material Dependency: The U.S. imports 85% of the materials used in battery production, including almost all separators, 83% of cathodes, and 67% of anodes. This heavy reliance on foreign suppliers, especially China, creates a vulnerable supply chain that cannot be quickly remedied.
- China's Retaliation: China has imposed 34% tariffs on U.S. battery exports and restricted rare earth element supplies. These moves could limit material availability and raise production costs, with experts predicting a 0.5% reduction in U.S. GDP by 2025.
To stay competitive, the U.S. must address these trade and supply chain challenges, ensuring its battery sector can meet rising demand while navigating geopolitical tensions.
