Trump's trade and tax policies start to stall U.S. battery boom

Battery manufacturing began to take off in the United States in recent years after Congress and the Biden administration offered the industry generous incentives.
But that boom now appears to be stalling as the Trump administration and Republican lawmakers try to restrict China's access to the American market.
From South Carolina to Washington state, companies are slowing construction or reconsidering big investments in factories for producing rechargeable batteries and the ingredients needed to make them.
A big reason is that higher trade barriers between the United States and China are fracturing relationships between suppliers and customers in the two countries. At the same time, Republicans are seeking to block battery makers with ties to China, as well as those that rely on any Chinese technology or materials, from taking advantage of federal tax credits. The industry is also dealing with a softening market for electric vehicles, which Republicans and President Donald Trump have targeted.
The China-related restrictions -- included in the version of Trump's domestic policy bill passed by the House -- would be very difficult for many companies to operate under. China is the world's top battery manufacturer and makes nearly all of certain components.
The Trump policy bill highlights a difficult dilemma. The United States wants to create a homegrown battery industry and greatly reduce its dependence on China -- and many Republican lawmakers want to end it altogether. But China is already so dominant in this industry that it will be incredibly hard for the United States to become a meaningful player without working with Chinese companies.
To cultivate a domestic industry, experts say, the United States needs to rely on foreign components and know-how as it builds its own supply chains and expertise, much as China did in the auto industry.
Among the plants at risk is a $3 billion battery factory Ford Motor is building in Marshall, Michigan, which is set to start making battery cells next year for the company's electric cars. Ford is licensing technology from the Chinese battery giant Contemporary Amperex Technology Co., which would quickly make it ineligible for federal subsidies under the House bill.
A loss of tax credits 'will imperil what we do in Marshall,' William Clay Ford Jr., the company's executive chair, said last month. 'We made a certain investment based upon a policy that was in place,' he added. 'It's not fair to change policies after all the expenditure has been made.'
Some companies are already pulling back. This month, the battery maker AESC paused construction of a $1.6 billion electric-vehicle battery plant in South Carolina, citing 'policy and market uncertainty.'
Batteries made there, which are meant to power BMW's electric vehicles, also would soon become ineligible for federal subsidies, at least in part because a Chinese company owns a large portion of AESC. Those tax credits amount to roughly $3,375 for the average electric vehicle battery, according to UBS.
Across the country, a startup, Group14 Technologies, slowed construction of a battery materials factory in Moses Lake, Washington, after its customers in China balked at paying higher tariffs. Instead, the company is focusing on ramping up production in South Korea, said Rick Luebbe, Group14's CEO.
'What caught the attention of our customers, particularly in China, was the really aggressive back-and-forth where the tariffs went up over 100%,' Luebbe said. 'At that point, folks said, 'You know what, maybe we'll just hold off.''
Trump and his aides have said they want companies to manufacture more in the United States. They also want more U.S. mining of critical minerals, many of which form the building blocks of batteries. But they have criticized electric vehicles and wind and solar energy, which drive demand for batteries.
Ben Dietderich, an Energy Department spokesperson, said the administration was investing in projects that would deliver a return on investment for Americans but did not directly address batteries.
The administration 'is working to develop more secure supply chains for critical energy infrastructure,' Dietderich said.
A White House spokesperson, Kush Desai, said the administration would 'shore up America's supply of critical minerals' by investigating imports of such materials on natural security grounds, mining for them offshore and repealing regulations.
Domestic battery makers have other problems besides the U.S. posture toward China. Chief among them is that electric vehicles have not become as popular in the United States as many companies had expected.
As a result, many companies delayed, canceled or scaled back projects, even before Trump increased tariffs and Republican lawmakers sought to eliminate tax credits. Companies canceled more than $6 billion in planned U.S. battery factories in the first quarter, according to Rhodium Group, a research firm that tracks investments with Massachusetts Institute of Technology's Center for Energy and Environmental Policy Research.
The Republican policy bill would further erode demand for electric cars -- and, by extension, the batteries that power them -- by scrapping a $7,500 tax credit available to many people who buy or lease them.
If that tax credit goes away, all planned U.S. battery plants will become unnecessary and more than two-thirds of existing capacity could shut down, according to an analysis by the Princeton University-led REPEAT Project.
Jennifer Granholm, the energy secretary under President Joe Biden, said scrapping clean-energy incentives would cost jobs and undermine U.S. energy security by making the country more dependent on China.
'For there to be an effective industrial strategy, you have to make America irresistible for investment,' said Granholm, a former governor of Michigan. 'You can't play a game with no offense.'
She said lawmakers should differentiate between Chinese equipment that could pose a threat to national security, such as devices that connect to the internet, and more basic materials like screws.
Others say the United States should welcome foreign investment, including from China, and learn from it.
'Restricting our market is just a first-order bad idea,' said Ann E. Harrison, an economist and former dean of the business school at the University of California, Berkeley. Competition drives innovation and efficiency, without which companies often struggle to survive in the long term, she said.
'The Chinese are already so far ahead,' Harrison said. 'At this point, I don't see us making the leap without fewer constraints.'
Group14, the startup, now expects to start production at its Washington state plant early next year, instead of this summer. The company makes a material that is designed to be a substitute for graphite, a key battery component that is almost entirely produced or processed in China.
'We can pull that back forward if there's resolution on tariff uncertainty and we see that wave of demand pick back up again,' Luebbe said.
A spokesperson for AESC said the company planned to restart construction in South Carolina once the market stabilized. The company has already spent more than $1 billion developing the site. It also makes batteries for energy storage systems in Tennessee.
BMW expects to start making electric vehicles nearby in late 2026, as planned, a spokesperson, Phil Dilanni, said. He declined to say where the batteries would come from.
This article originally appeared in The New York Times.
Copyright 2025

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