US tariff rollback may prompt short-term stockpiling of Chinese LFP batteries

The United States has significantly rolled back tariffs on Chinese lithium batteries, a move that could revive exports and lead to a short-term surge in orders, particularly for energy storage applications.

On May 12, China and the US issued a joint statement following trade talks in Geneva, announcing that tariffs would be lowered substantially by May 14. The US reduced its tariff rate on certain Chinese goods from 145% to 30%.

The development followed a series of tariff hikes earlier this year, which had raised duties on electric vehicle (EV) batteries to 173.4% and on non-automotive lithium batteries—such as those used in stationary energy storage—to 155.9%. These elevated rates had halted many exports and led to a cautious stance among manufacturers.

Under the revised terms, tariffs on Chinese EV batteries fell to 58.4%, while duties on non-automotive lithium batteries were lowered to 40.9%. These figures reflect a combination of base tariffs, earlier Section 301 measures, and additional levies imposed in early 2024. The Section 301 rate on EV batteries rose to 25% in September 2024, while non-automotive batteries are scheduled to rise to 25% in 2026, up from the current 7.5%.

Analysts expected the adjustment to spur a recovery in shipments. "The energy storage segment, in particular, may see a surge in short-term orders," said Chen Shan, an analyst at Rystad Energy.

Despite ongoing tariffs, China remained a key player in lithium iron phosphate (LFP) battery manufacturing. "At present, only China produces LFP batteries at scale," said Zhang Jinhui, senior researcher at ICCSINO.

According to industry sources such as Shanghai Metals Market, Chinese companies occupied all top 10 positions globally for energy storage battery shipments in 2024.

Selling to overseas markets generally delivered higher margins for energy storage products. For example, Hithium reported a gross margin of 42.3% for overseas energy storage sales in 2024, compared with 8.1% domestically. The company supplies both battery cells and integrated systems.

LFP batteries, which offer greater safety and cost efficiency than ternary lithium batteries, have become the preferred choice in the energy storage market.

Several US companies, including Tesla, relied on Chinese LFP batteries. In April, Tesla said its energy division had been significantly affected by tariff policy, noting it depended on Chinese-made LFP cells. The firm was testing US-based production but said it could only meet a portion of demand locally.

Separately, South Korea's LG Energy Solution announced it would begin LFP battery production for the US energy storage market one year ahead of schedule, with operations planned in Michigan.

Major Chinese battery makers such as CATL and EVE Energy have not issued public statements on the policy shift. Previously, both companies responded cautiously. EVE noted that direct shipments to the US comprised less than 4% of its business and that it used FOB pricing, insulating it from tariff costs. CATL said during its Q1 earnings call that the US accounted for a small portion of its shipments and that it had contingency plans in place.

In its latest prospectus, CATL said the US tariff landscape remained fluid, making it difficult to assess long-term implications.

According to the May 12 joint statement, the US suspended an additional 24% tariff for an initial 90-day period, during which China was expected to implement reciprocal measures. Whether these additional tariffs will be reinstated afterward remains uncertain, leaving the long-term outlook for Chinese battery exports to the US unclear.