Recently, Aaron Marks of Intertek CEA wrote that if the United States wants to build its own energy storage manufacturing capacity, simply restricting the participation of foreign entities is far from enough.

As of now, 2025 marks a significant shift in the way the United States conducts international trade, and this shift extends beyond the renewable energy market. The Trump administration's focus on tariffs and export controls represents a significant adjustment to the priorities of free trade and globalization that have prevailed for decades.

For all participants deeply involved in the trade sector and possessing a technological mindset, the core question is: Is the self-sufficiency vision implied by current government policies truly feasible?

Understanding " self-sufficiency " helps clarify the scale of this shift. Self-sufficiency refers to an economy achieving self-sufficiency, meaning a country's economic system does not rely on imports ( or exports ) . This model differs from economic models based on free trade and globalized supply chains, which are the cornerstone of most international trade today. This often means that many ( if not most ) technology supply chains depend on multinational cooperation or at least participation, and the lithium-ion battery supply chain undoubtedly falls into this category.

When we examine the battery supply chain from the perspective of various tariffs and tax credit restrictions on " foreign entities of concern , " the consensus within the current administration is that these policies aim to promote the relocation of the battery supply chain to the United States and bring as many battery manufacturing processes as possible into the country.

While building a fully localized battery industry is technically feasible, it is important to consider what that means, the cost, and whether there will actually be any participants willing to do so.

Lithium, graphite and other raw materials  

The upstream of the battery supply chain exhibits the highest degree of market diversification. Economically viable lithium mines are located globally, with Australia and South America dominating the raw material lithium market. With the continuous development of lithium brine lake extraction technology, the refining of lithium carbonate and other deep-processed compounds has achieved a global presence.

So what's the situation in the United States? Lithium resources do exist in the US, such as the Salton Sea in California, Thacker Pass in Nevada , and Smackover in Arkansas . However, the pace of development within the US is impacting the lithium industry: western projects have only recently received approval to proceed, while Standard Lithium 's project in Arkansas is currently in the demonstration phase.

However, there seems to be a certain degree of consensus: regardless of other trade policies, incentives are needed to develop new industries. Standard Lithium has received funding from the U.S. Department of Energy, and the Department of Energy recently acquired a 5% stake in the Thacker Pass  mine , providing much-needed financial support for this capital-intensive project that has already experienced delays.

It is worth noting that graphite production is not constrained by the cost pressures of mining and the huge exploration budgets associated with similar projects. Although natural graphite plays only a secondary role in energy storage batteries, synthetic graphite is the most commonly used anode material and can be produced wherever there is a carbon source.

The U.S. synthetic graphite industry was also in a rather immature stage. Although the American Graphite Producers Association had requested the Department of Commerce to finally rule on anti-dumping and countervailing duties, the application was based on the argument that artificially suppressed prices were hindering the formation of the industry, while at that time the U.S. actually had no synthetic graphite production capacity.

Although the final anti-dumping and countervailing duties reached 105% to 115% of the price of graphite ( the rate varies depending on the producer ) , the price of high-quality synthetic graphite, including taxes, is still only $ 5-7 per pound , and it is unlikely that graphite produced in new factories will reach this price level. While battery manufacturers are waiting to see if the US can establish graphite processing capacity, currently about 90% of battery anode active materials are processed and produced in China.

Current status of midstream processing

The negative electrode of a battery is inseparable from graphite; apart from graphite, very few other components are needed to manufacture the active material of the negative electrode. On the other hand, the active material of the positive electrode is not composed of lithium alone, and it does not have the same distribution diversity advantage as upstream lithium resources.

Similar to graphite and anode active materials, over 90% of lithium iron phosphate cathode processing capacity is located in China, while capacity expansion outside of China has been relatively slow. China has also implemented export controls on high-performance cathode active material technologies, a measure that may further solidify its position in the supply chain.

It remains unclear whether export controls will hinder lithium iron phosphate production outside of China, but this will inevitably slow down the adoption and development of high-end batteries, which is precisely what has propelled China's dominance in the battery market.

There has also been some progress in North America, although it is still in its early stages overall. Recently, startup Electroflow secured $ 10 million in funding for its novel lithium processing technology. The company aims to produce lithium iron phosphate at a cost of $ 2.50 per kilogram , a price even lower than the current market price in China excluding taxes and fees.

If Electroflow successfully achieves this goal, it could disrupt the lithium iron phosphate cathode market and permanently change the US battery supply chain. However, Electroflow is still in its early stages of development, and there are uncertainties and risks surrounding the full commercialization of its technology.

Battery manufacturing

The battery manufacturing sector has already responded to broader market changes, starting with automakers and then other original equipment manufacturers (OEMs). They have all been working to meet U.S. battery demand by establishing domestic battery manufacturing facilities.

However, this demand prioritization has recently created problems for battery energy storage system integrators and developers because two key characteristics of electric vehicle batteries do not match the needs of energy storage batteries.

First, most electric vehicle batteries manufactured in the United States use nickel-manganese-cobalt ternary cathode materials. This cathode material provides higher energy density at the expense of cycle life, which is ideal for cars where driving range is a key differentiator. Even with only 3,000 cycles ( 80% capacity retention ), such batteries can still support more than 500,000 miles of driving range in almost all modern electric vehicles , but this is a substandard rating for energy storage systems.

The second characteristic is battery form factor. Electric vehicles use cylindrical batteries, which achieves higher power density ( and shorter charging times ) at the expense of energy density . Given that electric vehicle motors can operate at discharge rates up to 4C , while typical energy storage systems typically operate at discharge rates between C/4 and C/2 , this design again demonstrates adaptability. However, this also means that all the production capacity built for electric vehicles cannot serve the energy storage market.

However, the dynamic demand for electric vehicles and energy storage systems over the past year has driven original equipment manufacturers (OEMs) to adapt where feasible. LG Energy Solution uses pouch cells in both its electric vehicles and energy storage batteries, which has made it easier to convert its electric vehicle battery production lines to produce energy storage batteries, in the process making it the largest domestic energy storage battery manufacturer in the United States.

In the coming years, the scale of energy storage battery manufacturing in the United States will see unprecedented growth, but the fate of downstream energy storage system manufacturing remains uncertain, as most of the production capacity comes from foreign companies and much of it is achieved by modifying existing facilities.

Most new battery manufacturing projects in the United States have either failed or stalled. Currently, all battery manufacturing facilities in the planning stage are not from new companies. Having domestic manufacturing capacity will reduce geopolitical risks and tariff burdens, which is positive for the overall development of the energy storage industry.

Nevertheless, because most of the production capacity relies on existing supply chains in other countries, even the most mature links in the U.S. battery supply chain remain highly interconnected with the global market network.

Emerging policy uncertainty meets growing demand

Ultimately, while some parts of the supply chain are more developed than others, achieving a fully domestic lithium-ion battery supply chain in the United States is unrealistic. The policies in the budget bill aim to address these challenges, but historical experience shows that trade policy alone is often insufficient to effectively encourage industrial investment or growth.

Rising battery supply prices that comply with the " Foreign Entities of Concern " rule and shrinking profit margins for non-compliant suppliers mean that energy storage demand will continue to be met by the same group of original equipment manufacturers currently active in the market, with only their relative market share changing.

South Korea's position is expected to become increasingly important, while China's share may decline, and the overall market structure may become more similar to what it was about ten years ago, rather than the situation immediately following the passage of the Inflation Reduction Act in 2022. Demand will slow in the short term, but history shows that technological advancements lead to lower prices, and the aging North American power grid will continue to drive demand for energy storage.

Despite a clear long-term growth trend in demand, today's developers and integrators must confront the uncertainties brought about by emerging policies. Market conditions ( whether naturally formed or policy-driven ) clearly demonstrate the role that local industries and short supply chains can play in influencing operational risks.

At the same time, the global supply chain infrastructure remains flexible, and existing suppliers have already begun to adapt to the new regulatory environment. Whether by complying with new regulations or evaluating options for continuing to develop without tax credits, companies looking to deploy energy storage projects in the face of current regulations have a variety of strategies to choose from.

Furthermore, with the anticipated increase in future electricity demand and prices, the scale and characteristics of energy storage demand are expected to change accordingly, and this change is not entirely determined by the current political environment.