Can the US battery market untangle from China?

The United States is experiencing rapid growth in its energy storage market, setting records for new installations. This expansion is driven by the need to improve grid reliability, reduce emissions, and support the integration of intermittent renewable energy sources like wind and solar. Batteries play a critical role by storing excess energy generated during peak production times for later use. The growth has been supported by affordable batteries imported from China, which dominate the global market. However, this reliance has prompted concerns about supply chain security and national independence in energy technology. The Trump administration recently took steps to reduce this dependence through policy changes and restrictions on Chinese batteries.

In late August, the Trump administration declared a national emergency to ban Chinese batteries from being used in grid-scale energy storage systems in the US. This executive order targets any foreign-produced bulk-power system electric equipment deemed a national security risk, explicitly including battery energy storage systems, inverters, and transformers. The move is intended to reduce reliance on Chinese technology but has raised concerns among domestic players. According to Shan Tomouk, an energy analyst at Benchmark Mineral Intelligence, the ban could slow the deployment of grid-connected energy storage projects due to uncertainty and the need to find alternative, likely more expensive, sources for battery cells.

The US government has used tax credits as a policy tool to incentivize the use of domestic or non-Chinese battery technologies. The Inflation Reduction Act of 2022 initially restricted tax credits by requiring that battery minerals be mined, processed, or recycled outside China, and that battery assembly occur outside restricted countries. These rules were updated in 2025, and the Trump administration has continued this approach. Starting in 2026, 55% of the cost of materials for new energy storage projects must come from outside China or other restricted countries to qualify for tax credits. This aims to make domestic or alternative sources more competitive despite higher costs.

In January, import taxes on batteries increased to 25%, up from 7.5%. This tariff hike is part of a broader effort to reduce reliance on Chinese batteries by making them more expensive to import. The higher tariffs apply to all battery imports, not just those from China, but the policy is designed to discourage the use of Chinese-made batteries in the US market. While the tariffs aim to support domestic battery production, they also increase the overall cost of energy storage projects, potentially slowing their deployment. The executive order banning Chinese batteries is a more drastic measure than tariffs, directly prohibiting their use in grid-scale storage systems.

The new executive order and policy changes are expected to slow the deployment of grid-connected energy storage projects in the near term. Developers may face delays as they wait for clearer guidance from the Department of Energy, which is expected by the end of the year. Some projects might need to find alternative sources for their battery cells, either domestically produced or imported from other countries, which are likely to be more expensive than Chinese imports. According to Isshu Kikuma, an energy storage analyst at BloombergNEF, the worst-case scenario could involve project cancellations. The order technically applies even to existing energy storage plants, though enforcing it fully would likely mean removing most installed battery energy storage systems from the US grid.

The US is working toward meeting its own battery demand, with domestic production capacity expected to grow significantly by around 2030. However, new factories may not operate at full capacity immediately, meaning domestic supply might not meet demand until later in the 2030s. Several major companies, including LG Energy Solutions, Samsung SDI, Ford, and SK On, are building or expanding factories in the US. Interestingly, a slowing electric vehicle (EV) market is freeing up capacity, as some factories originally designed for vehicle batteries are being retooled to produce cells for grid storage instead. This shift could help bridge the gap in supply while domestic production ramps up.

Batteries produced in the US are currently significantly more expensive than those made in China. Even importing batteries from other countries like South Korea would likely be more costly than relying on Chinese imports. This cost disparity reflects China’s dominant position in the global battery market, built over years of government support, research investment, and manufacturing experience. China leads in technologies like solar panels and batteries, making it a key player in the energy transition. The US faces a challenge in balancing the use of affordable, available technology with the risks of over-reliance on a single supplier for critical energy technologies.