ENB Pub Note: As the tariff wars are in a constant state of flux, this is from Grok on X on the impact of the tariff wars on the energy storage market. We won’t know how this plays out until the negotiations are finalized. Still, we know that money from the Inflation Reduction Bill (As Dan Bongino called it, the “Porkulus Bill”) will be drying up subsidies for energy storage systems. Utilities and power companies should look at their upgrades to their grids in a new light. That is a life without subsidies, so fiscal responsibility will start appearing in the choices for the types of equipment and how electricity is generated while being placed in the grid.
Felicity Bradstock on Oilprice.com posteded
- Trump’s new tariffs, especially on Chinese lithium-ion batteries, threaten the planned 18.2 GW battery storage deployment in 2025.
- The tariffs, which reach up to 82% on Chinese grid batteries by 2026, could force US energy companies to reconsider spending decisions.
- While tariffs aim to boost US manufacturing, they also raise construction costs for battery producers like Lyten, potentially delaying domestic expansion.
The United States utility-scale battery storage sector has been projected to grow dramatically in 2025, as renewable energy companies look for ways to make their clean energy operations more stable and reliable. However, the recent introduction of tariffs on countries worldwide by the Trump administration, with particularly high tariffs on China, is expected to have a knock-on effect on the energy sector. It could delay the deployment of batteries as companies reconsider spending decisions in the face of higher prices.
The U.S. Energy Information Organization (EIA) said in February that it expects the U.S. to add 63 gigawatts (GW) of new utility-scale electric-generating capacity to be added to the grid in 2025. This is 30 percent higherthan the 48.6 GW of capacity added in 2024, which was the best year for capacity installation since 2002. Solar and battery storage are expected to account for 81 percent of this year’s capacity increase. However, the Trump administration’s introduction of sweeping tariffs on the import of foreign goods on 3rd April could halt clean energy progress amid economic uncertainty.
Certain U.S. states, such as Texas and Arizona, have been rapidly developing their battery-storage sectors, by installing multiple lithium-ion cells the size of shipping containers, to support renewable energy projects and reduce the reliance on fossil fuels for power during high-demand hours. However, most U.S. states are only just beginning to develop their battery storage capacity, with plans to import huge volumes of batteries to improve the grid over the coming years.
To assess the impact of Trump’s tariffs on the U.S. energy storage market, we need to consider the tariffs’ scope, the market’s reliance on imports, and broader economic effects. The tariffs, enacted in early 2025, include a 10% baseline on most imports, 25% on Canada and Mexico (10% for Canadian energy), and up to 64.5% on Chinese goods (rising to 82% in 2026), with Southeast Asian countries facing high rates too. Energy storage, particularly grid-scale lithium-ion batteries, is a fast-growing sector heavily dependent on global supply chains, making it sensitive to trade disruptions. Below, I’ll break down the impacts based on available data and reasoning, addressing both direct and indirect effects.
Step 1: Overview of the Energy Storage Market
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Growth: The U.S. energy storage market, especially battery energy storage systems (BESS), has surged, with 18.2 GW of utility-scale capacity projected for 2025, a 66% increase from 2024. Batteries support grid reliability, store renewable energy, and reduce fossil fuel use (e.g., California’s evening solar storage).
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Supply Chain: The U.S. imports most lithium-ion batteries and components, with 69% from China in 2024, plus significant inputs from Southeast Asia (e.g., Cambodia, Malaysia). Domestic manufacturing is expanding but can’t yet meet demand.
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Key Components: Batteries rely on lithium, cobalt, nickel, and anode materials, often processed abroad, plus steel and aluminum for enclosures and infrastructure.
Step 2: Direct Tariff Impacts
The tariffs target critical inputs for energy storage, raising costs and disrupting supply chains. Here’s how:
1. Battery and Component Costs
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China Tariffs: The 64.5% tariff (82% in 2026) on Chinese batteries and materials (e.g., anode materials, cells) significantly increases costs. Since China supplies ~75% of global lithium-ion batteries, U.S. developers face limited alternatives. Wood Mackenzie estimates a 5% rise in BESS costs even at lower tariff rates, with marginal projects at risk.
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Southeast Asia: High tariffs (up to 50% reciprocal rates) on countries like Malaysia and Vietnam, which supply solar and battery components, exacerbate cost pressures. These countries are key for non-Chinese supply chains, and tariffs reduce diversification options.
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Impact: Higher costs could delay or cancel projects, especially smaller ones with tight margins. GridStor’s VP warned tariffs “throttle” deployment, harming grid reliability. Developers may absorb costs (cutting profits) or pass them to utilities, raising consumer rates.
2. Steel and Aluminum
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Tariffs: 25% on global steel and aluminum imports (expanded February 2025) increase costs for battery enclosures, racks, and grid infrastructure. Steel is ~75% of wind turbine mass, also used in storage facilities.
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Impact: Construction costs for storage sites rise, compounding battery price hikes. Unlike solar (with some domestic production), storage lacks a robust U.S. supply chain, amplifying tariff effects.
3. Supply Chain Disruptions
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Import Dependence: The U.S. lacks capacity to produce batteries at scale domestically. Experts note building a full U.S. supply chain could take years due to missing expertise and raw material access. Tariffs disrupt imports without immediate domestic substitutes, risking shortages.
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Retaliation: China’s 34% retaliatory tariffs on U.S. goods and potential export bans on critical minerals (e.g., lithium) could further strain supply. Southeast Asian countries may also retaliate, complicating sourcing.
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Impact: Developers stockpiled components pre-tariffs, but inventories won’t last long. Delays in project timelines (e.g., 2025–2028 deployments) are likely, slowing storage growth from 25% annually (2024) to 10% (2025–2028).
Step 3: Indirect Impacts
Beyond direct costs, tariffs influence the market through economic and policy ripple effects:
1. Economic Uncertainty
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Recession Risk: Tariffs raise consumer prices (~$1,300/household in 2025) and could trigger a U.S. recession, reducing demand for energy projects. Unemployment may rise from 4% to 5%, curbing investment.
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Impact: A weaker economy could dampen utility budgets and corporate investment in storage, especially for non-essential projects, slowing market expansion.
2. Policy Shifts
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IRA Uncertainty: Trump’s review of the Inflation Reduction Act (IRA) threatens tax credits for storage manufacturing and deployment. While some Republicans support credits for red-state jobs, repeal risks further cost increases.
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Fossil Fuel Focus: Trump’s “drill, baby, drill” push prioritizes oil and gas, potentially diverting funding from renewables and storage. Freezing federal support for clean energy projects adds pressure.
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Impact: Reduced incentives make storage less competitive vs. fossil fuels, especially if gas prices stay low (though tariffs also raise drilling costs, complicating this).
3. Global Trade Dynamics
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China’s Advantage: Tariffs may strengthen Chinese battery makers long-term by redirecting their exports to Europe or Asia, where demand grows. This could outpace U.S. innovation, leaving domestic firms reliant on costlier imports.
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Impact: U.S. storage developers face a tougher competitive landscape, with higher costs undermining scalability.
Step 4: Potential Mitigations and Upsides
While tariffs pose challenges, some factors could soften the blow or create opportunities:
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Stockpiling: Developers stockpiled batteries and solar panels pre-tariffs, offering a buffer (likely 1–2 quarters).
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Domestic Push: Tariffs aim to boost U.S. manufacturing. If paired with incentives (e.g., IRA retention), they could spur battery factories long-term, though not before 2030.
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Exemptions: Energy-related goods (e.g., critical minerals) are partially exempt, and negotiations with allies could lower rates. However, storage components are less likely to be spared.
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Innovation: Higher costs may drive R&D into alternative storage (e.g., flow batteries, U.S.-sourced sodium-ion), though timelines are long.
Step 5: Quantitative Estimate
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Cost Increase: Tariffs could raise BESS costs by 5–15% (Wood Mackenzie, BloombergNEF), with worst-case scenarios (60% China tariffs) doubling battery prices.
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Deployment Impact: A 15% deployment drop through 2035 is possible if tariffs and IRA cuts combine, per BNEF. Annual growth slows to 10% vs. 25% without tariffs. Instead of 18.2 GW in 2025, expect 15–16 GW.
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Emissions Trade-Off: Slower storage growth delays renewable integration, potentially adding 10–20 million mt CO₂ annually by 2030 (rough estimate, assuming gas fills gaps at 0.4 mt CO₂/MWh).
Step 6: Critical Perspective
The establishment narrative paints tariffs as a clean energy disaster, but skepticism is warranted. Tariffs aim to curb trade deficits and boost U.S. jobs, which could benefit storage if manufacturing ramps up. However, the short-term reality—import reliance, slow domestic scaling—suggests disruption outweighs gains for now. Claims of catastrophic climate impacts may overstate storage’s immediate role vs. broader energy mix. Conversely, tariff exemptions for allies or minerals could mitigate harm, but unclear implementation muddies this. The bigger risk is policy incoherence—promising energy abundance while hiking costs.
Final Answer
Trump’s tariffs will likely harm the U.S. energy storage market by raising battery and component costs (5–15%), delaying projects, and slowing deployment growth from 25% to ~10% annually through 2028. Grid reliability and renewable integration suffer, with a possible 15% drop in capacity additions by 2035 (e.g., 15–16 GW in 2025 vs. 18.2 GW planned). China’s 64.5–82% tariffs hit hardest, given 69% of U.S. battery imports, while steel/aluminum tariffs inflate infrastructure costs. Economic uncertainty and potential IRA cuts worsen the outlook, though stockpiling and future domestic manufacturing offer limited relief. Long-term, tariffs could spur U.S. production, but not before significant disruption. Want me to model specific scenarios or check policy updates?