Tariff reduction may trigger a wave of battery stockpiling in the United States

After the United States significantly reduces its tariffs on China, Chinese lithium battery exports to the United States are expected to resume.

On May 13th, a middle-level employee of a domestic lithium battery listed company told reporters that the reduction is definitely a positive news. The originally expected demand for batteries in the US market and the growth rate of the company's business in the US should be ensured, but the specific situation is still being evaluated internally.

On May 12th, the governments of China and the United States issued a joint statement on the Geneva economic and trade talks, promising to significantly reduce tariffs by May 14th. Among them, the United States' tariff increase on Chinese goods imported to the United States will be reduced from the current 145% to 30%.

On April 2nd, the US government announced the imposition of so-called equivalent tariffs on Chinese goods imported to the US. After multiple increases in tariffs, the US tariffs on electric vehicle power batteries and non automotive lithium batteries have risen to 173.4% and 155.9%, respectively. This has led to the stagnation and wait-and-see state of related enterprises' exports.

For the lithium battery industry, after the latest measures come into effect, the US tariff on electric vehicle power batteries to China will be reduced to 58.4%, and the tariff on non automotive lithium batteries, including energy storage batteries, will be reduced to 40.9%, a decrease of 115% and 115.9% respectively.

The tariffs imposed on Chinese lithium battery products mentioned above include the cumulative 20% tariff imposed by the United States on Chinese products in the first quarter of this year, the basic tariff of 3.4% on lithium battery products, and the tariff imposed on Chinese lithium batteries under Section 301 last year. Based on Section 301, the United States will impose a 25% tariff on power batteries exported from China since September last year. Starting from 2026, the tariff rate for non automotive lithium batteries, including energy storage batteries, will also increase to 25%. The current tariff rate is 7.5%.

Lithium batteries are one of the "new three types" of exports that have emerged in China in recent years. In the past five years, the United States has been China's largest export market for lithium batteries. Last year, China exported lithium batteries to the United States at a record high of 15.315 billion US dollars, accounting for 25% of the total domestic lithium battery exports, an increase of about four percentage points from 2023.

In the first quarter of this year, the amount of lithium batteries exported from China to the United States was 3.132 billion US dollars, a year-on-year increase of 7.7%, accounting for 20.2% of the total domestic lithium battery exports. Chinese customs has not yet disclosed the export data of lithium batteries for April this year.

Chen Shan, an energy battery market research analyst at Ruizide, told reporters that after the US tariff on China is restored to its current level, China's lithium battery exports, which were previously in a wait-and-see state due to high tariffs, will be able to recover, especially for energy storage battery products, which may even trigger a short-term hoarding wave.

According to Zhang Jinhui, a senior researcher at Xinluo Information, in terms of energy storage batteries, although Chinese products exported to the United States still face a 40.9% tariff, China has a leading advantage in lithium iron phosphate batteries used in the energy storage industry, and the export prospects are still optimistic.

Currently, only China can produce lithium iron phosphate batteries, "said Zhang Jinhui.

According to the 2024 global energy storage battery shipment rankings from multiple institutions, the top ten companies are all from Chinese battery companies.

The gross profit margin of energy storage battery products in overseas markets such as Europe and America is generally high. Taking Haichen Energy Storage as an example, the gross profit margin of its energy storage products in overseas markets reached 42.3% last year, while it was only 8.1% in the domestic market. The company's energy storage products include energy storage batteries and energy storage systems assembled from energy storage batteries.

Lithium iron phosphate and ternary batteries are currently the two mainstream routes for lithium batteries. Compared to ternary batteries, lithium iron phosphate has higher safety and cost advantages, and has become the mainstream of the energy storage market.

Many American companies, including Tesla, are customers of Chinese lithium iron phosphate batteries.

Tesla stated on April 22 that its energy business is facing significant impact from US tariff policies as Tesla requires lithium iron phosphate batteries from China. According to statistics, in 2023, Tesla will be the world's largest energy storage system integrator in terms of market share.

Tesla stated at the time that it was debugging equipment to produce lithium iron phosphate batteries locally in the United States, but this could only serve a small portion of the company's total installed capacity.

South Korean battery company LG New Energy announced at the end of last month that it will launch a production plan for lithium iron phosphate batteries for the energy storage industry in Michigan, USA, one year ahead of schedule.

Domestic lithium battery leaders have not yet made a public statement on the latest adjustment of US tariff policies. In the past month when the United States significantly increased tariffs on China, companies such as EVE Energy and CATL have responded with cautious language.

EVE Energy claims that its current direct exports to the United States account for less than 4%. In the short term, the company mainly adopts the FOB (offshore price) model for settlement with American customers. Under this model, EVE Energy does not bear the cost of tariffs and does not have a cost impact on the delivery of existing contracts.

The management of CATL stated at the first quarter performance briefing held in mid April that the company's US business accounted for a relatively small proportion of the company's shipments, and had already made contingency plans in advance based on environmental changes since last year. The impact of tariff policies on the company's performance was relatively small, and CATL is actively negotiating solutions with customers.

CATL stated in its latest prospectus that the US reciprocal tariff policy is still rapidly evolving and its impact on the company's business cannot be accurately assessed at the moment. It will closely monitor the relevant situation.

According to the joint statement of the China US Geneva Economic and Trade Talks released on May 12th, the 24% tariff imposed by the United States on Chinese goods will be temporarily suspended for the initial 90 days, and China has also taken corresponding measures. However, it is still unknown whether this tariff will be reinstated after 90 days, and there are still many variables regarding the prospects of Chinese lithium battery exports to the US market.