US hikes tariffs on Chinese batteries to 25%
TL/DR –
The White House is taking measures to increase tariffs on imported goods, including raising the tariff for battery parts from 7.5% to 25% in 2024 as part of a move to protect American workers and businesses. This move is in response to China’s dominance in the global lithium-ion battery market and its practice of flooding global markets with low-priced exports. The tariffs also complement Biden’s Inflation Reduction Act that provides subsidies and funding for clean energy industries, but also aims to balance out the threat of lower prices from China that could impact US industry competitiveness.
Tariffs on Battery Parts to Surge in 2024
By 2024, tariff rates for battery parts will increase from 7.5% to 25%. Additionally, natural graphite and permanent magnets will see tariffs climb from zero to 25% in 2026. Similarly, tariffs for specific critical minerals will rise from zero to 25% in 2024. This is part of the White House’s measures to protect American workers and businesses from China’s unfair trade practices.
The measures also encompass increasing solar cell tariffs from 25% to 50%, raising EVs from 25% to 100%, and implementing the same on other industry products like cranes and medical equipment. China, which accounts for 80-90% of the global lithium-ion battery market production, is flooding markets with artificially low-priced exports.
US Response to Chinese Unfair Trade Practices
In response to China’s unfair trade practices, President Biden has instructed his Trade Representative to augment tariffs under Section 301 of the Trade Act of 1974 on US$18 billion of imports from China. These tariff hikes extend to batteries and other clean energy technology products such as solar cells, enacted since 2018 under the Trump Administration.
The existing 7.5% tariff rate for batteries rises to 10.89% when importing entire battery energy storage system (BESS) products containing lithium-ion cells from China. This coincides with Biden’s Inflation Reduction Act, which offered diverse tax credit subsidies and funding sources for clean energy industries.
Non-EV Batteries Implementation Date
Notably, lithium-ion batteries not intended for the EV market will encounter the elevated tariff two years after those for EVs. The Inflation Reduction Act has spurred a surge in US battery manufacturing projects, a majority of which will serve the EV industry.
By 2026, BESS manufacturers have an extra two years to source US-made cells to shield themselves from the 25% tariff. BESS manufacturers had been exploring methods to secure local cell capacity even before this announcement, anticipating a domestic content tax credit. With the new tariff, the cost of Chinese batteries increases by nearly a fifth.
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