I. Tariff Mechanism Analysis
Trump initiated its so-called "reciprocal tariff" policy on April 2, 2025, imposing differential tariffs on 185 global economies. Among them, China faces a 34% additional tariff, reaching a cumulative 54% when combined with existing 20%, while Japan and Korea were hit with 24% and 25% respectively, and the EU with 20%. An April 8 supplemental executive order further raised China's tariff rate to 104%.
This adjustment not only targets China but also simultaneously levies new tariffs on Southeast Asian nations including Vietnam, Thailand, and Malaysia, completely blocking "circumvention export" pathways.
Under the new tariff, Chinese power batteries now face 123.4% total tariffs, and that of energy storage batteries incur 105.9% as Trump had previously invoked Section 232 to impose an additional 25% tariff for automobiles and auto parts on March 26 - with vehicle tariffs effective April 3 and parts tariffs effective May 3 - these categories are exempt from the current reciprocal tariffs.
II. Short-term Impacts and Structural Shifts in Lithium-ion Battery Exports
1). Sharp Decline in Direct Exports:
In 2024, China's lithium battery exported to the U.S. reached $15.32 billion, accounting for 25% of total exports. Among them, energy storage batteries dominated with a 57% share, about 35-40 GWh. However, power batteries were severely constrained by the IRA, making up just 1.4%, less 1.8 GWh. Under the 104% tariff, prices of Chinese lithium battery products in the U.S. market will double, making order relocation inevitable in the short term.
2). Limited Indirect Impact on Power Batteries
Direct exports of Chinese power batteries to the U.S. in 2024 totaled just 1.8 GWh, accounting for 1.4% of total exports.Under the IRA, U.S. automakers are prioritizing Japanese or Korean supply chains, and the new tariffs further erode China's price competitiveness. It's likely that power battery exports to the U.S. may plunge over 80% YoY in 2025.
In addition, Japan and Korea face similar tariff levels, ensuring supply chain stability. The new tariffs won't disrupt the U.S. NCM cathode material supply landscape.
CATL's U.S. power battery installations in 2024 totaled 14 GWh, accounting for 12% market share. Corresponding 18 GWh direct or indirect exports, 12,000 tonnes of lithium carbonate.
3). Significant Pressure on Energy Storage Field
It's known that 90% of U.S. energy storage market relies on Chinese LFP batteries, with domestic U.S. capacity ramping up slowly. And self-sufficiency rate in 2024 lowered 20%. The higher tariffs may force project developers to shift to Korean suppliers such as Samsung SDI and LG Energy Solution's LFP transition. However, Korean LFP capacity remains limited and insufficient to meet U.S. demand, maintaining reliance on Chinese imports.Based on the 40 GWh U.S. energy storage battery imports in 2024, the corresponding lithium carbonate equivalent (LCE) demand reaches 24,000 tonnes.
III. Three Breakthrough Strategies for Chinese Enterprises
1) Next-Gen Battery Tech Race
Chinese battery companies are accelerating their R&D and installation of solid-state batteries, which is expected to form new leading advantages and strong market competitiveness in the next wave of battery technology. CATL's sulfide electrolyte technology has been tested on the vehicle, with an energy density exceeding 400 Wh/kg.
Sodium-ion batteries have shown a rising trend in China this year. With the mass production and application driving cost reduction, the long-term manufacturing cost will be lower than that of lithium-ion batteries. In the future, it is expected to bypass the tariff restrictions on lithium batteries and open up a new track for Chinese battery companies in the international market. With the landing and application of CATL's sodium ion battery technology on the Xiaoyao super hybrid battery, sodium ion batteries will be used in vehicles other than A00, further expanding their market share in the field of EVs. Coupled with the potential application of sodium ion batteries in energy storage, Zeng Yuqun's expectation for sodium ion batteries has also increased from replacing 20% -30% of lithium iron phosphate market share to replacing 50%.
2) Global Production Network
Southeast Asia: CATL's $6 billion base in Indonesia and Gotion High Tech's 20 GWh project in Vietnam.
Middle East: BYD receives a 12.5 GWh energy storage order from Saudi Arabia.
Europe: CATL Germany factory put into operation and Hungary factory will have a production capacity of 100 GWh by 2025; The annual production of 20 GWh batteries project at Gotion High Tech Slovakia base has been launched.
Latin America: EVE Energy Brazil factory will be put into operation in 2025, supplying Tesla's South American super factory.
3) Business Model Innovation
Battery Leasing Services: Sungorw has launched the energy storage equipment leasing and revenue sharing model, which uses innovative models such as shared energy storage and energy storage leasing to reduce the investment threshold for energy storage owners while maximizing the utilization rate of energy storage equipment. It transforms hardware exports into service exports, and at the same time, its retired batteries can be recycled and reused.
Localized Battery Recycling: GEM has established a 50,000-tonne recycling capacity in the United States, achieving a closed-loop system of "mines-manufacturing-recycling". Thus avoiding import restrictions on related raw materials.
IV. Short-Term Impact vs. Long-Term Resilience
U.S. tariffs will reduce China's lithium-ion battery exports in the short term, leading to lower lithium carbonate (LCE) demand and downward price pressure. However, in the long run, Global energy transition remains irreversible, with China retaining its role as the core player due to its advantages in the entire industry chain and technological iteration. And tariff barriers are difficult to shake its foundation.