Batteries are an increasingly important element in the US-China strategic competition. Batteries are not only used for commercial items, such as electric vehicles (EVs) or battery energy storage systems (BESS)—they’re also crucial military enablers employed in unmanned aerial, surface, and subsurface systems, diesel-electric submarines, electronic warfare systems, military microgrids, and directed energy weapons.
Strikingly, the per-kilogram prices of Chinese lithium-ion batteries exported to the United States are lower than the same product sold to any other market. The low per-kilogram prices may stem from China’s export of heavier BESS batteries to the United States—or anti-competitive tactics meant to oust US, Korean, and Japanese manufacturers in a militarily relevant technology. Given batteries’ dual-use potential and domestic production prospects, the United States should raise tariffs on Chinese imports and boost funding for domestic and allied supply chains.
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Chinese leaders recognize the commercial and military potential of next-generation batteries. Beijing has directed top firms to collaborate on solid-state battery development and banned Chinese companies from supplying batteries to Skydio, the largest US drone maker. Earlier this month, the US Department of Defense (DOD) designated China’s largest battery maker, CATL, as a military company.
The DOD may have made the designation due to CATL’s potential collaboration with the Chinese navy on lithium-ion battery-powered submarines. Currently, only Japan operates such submarines, although South Korea is building three of them. The DOD’s move may indicate that China is also using advanced batteries to enhance its submarine force.
Despite batteries’ dual-use applications, Chinese companies are global players. Chinese export destinations for lithium-ion (Li-ion) batteries are highly diversified, as the chart below shows.
Significantly, Chinese Li-ion battery exports to the United States have risen sharply in recent months, reaching an all-time high of $1.9 billion in December 2024. Chinese exporters may have been expediting shipments to avoid potential tariffs before President Donald Trump’s inauguration. But also, Chinese manufacturers often accelerate shipments in December to meet year-end targets and account for the production slowdown during Lunar New Year celebrations.
While Chinese battery global export earnings have declined from recent highs, focusing on dollar amounts doesn’t tell the whole story. As measured in weight, Chinese Li-ion battery exports are rising.
Chinese trade data shows that battery exports by weight have increased year-over-year, while their export value has declined. In 2024, the United States imported 923,000 tons, slightly less than the EU’s 938,000 tons. However, comparing volumes has limitations since batteries vary widely in function and are not interchangeable commodities.
Even as the quantity exported rises, battery prices on a per-kilogram measure have dropped. Indeed, the average global per-kilogram export price of China’s lithium-ion batteries fell from $32.9 in 2020 to $20.1 in 2024.
Remarkably, Chinese per-kilogram battery export prices to the United States are the lowest in the world—only continental Latin America even comes close.
Tariffs don’t seem to be playing a major role. Chinese exporters of lithium-ion EV batteries to the United States now face a 25 percent tariff after President Joe Biden raised rates in a May executive order, up from 7 percent. But storage batteries—which are China’s primary Li-ion shipment to the United States—are not subject to the higher rate until 2026; they currently face an effective tariff rate of only 10.9 percent.
Importantly, China’s per-kilogram battery export prices vary depending on the type of batteries supplied to different markets. Stationary battery storage systems, typically weighing over 1,500 kilograms, contrast with EV batteries, which generally weigh between 326 and 544 kilograms. However, Chinese trade data, reported at the 8-digit Harmonized Tariff System (HTS)-level for external audiences, does not differentiate between lithium-ion batteries for energy storage or EVs.
In contrast, the United States’ more transparent data on Li-ion battery imports does distinguish between these categories, with most imports consisting of heavier battery energy storage systems. Significantly, per-kilogram battery costs are lower for battery energy storage systems than batteries for EVs. US BESS per-kilogram costs averaged $19.7 through the first eleven months of the year, while batteries for EVs averaged $28.8, according to US trade data. Chinese trade data also show that the EU imports more Li-ion battery units than the United States, suggesting Europe’s imports are more focused on EV batteries. This aligns with Europe’s higher EV penetration rate, which explains China’s relatively lower Li-ion battery export prices to the United States.
Indeed, US deployments of Li-ion storage projects are another factor driving its per-kilogram Li-ion battery import costs lower. Battery storage deployments have surged from 3.4 gigawatts (GW) in 2021 to nearly 8.3 GW in the first eleven months of 2024—a period that correlates with the decline in Chinese per-kilogram export prices.
Chinese battery exporters may indirectly benefit from the US solar deployment boom, despite limited eligibility for tax credits. About 53 percent of US solar projects—and 98 percent under the California Independent System Operator (CAISO), the United States’ most advanced solar market—include paired battery storage in order to reduce curtailment. While US data on its domestic Li-ion BESS production is lacking, market actors suggest China supplies most BESS batteries; conversely, EV batteries are primarily made in the United States. Without policy shifts, such as greater tariffs on Chinese products or more incentives for domestic manufacturing, Chinese suppliers are likely to dominate the growing BESS market.
Finally—and while difficult to prove definitively—Chinese battery exporters may be lowering per-kilogram prices to undercut US and allied manufacturers. US battery investment has surged, rising from under $4 billion in 2021 to over $33.8 billion by late 2024, potentially triggering worries in Beijing that the United States could eventually surpass China in this dual-use technology. Meanwhile, Chinese and South Korean exporters—the top two suppliers to the United States—appear locked in a price war, although Chinese shipments of storage batteries far outweigh South Korea’s, totaling 678,000 tons versus 58,000 tons through November 2024.
It is preferable for the United States that South Korea—a US treaty ally and vital defense industrial base partner, including in semiconductors and shipbuilding—can compete with China in batteries. Indeed, the United States and its allies must win the battery race with China, especially given the technology’s military applications. Accordingly, increasing and accelerating tariffs on Chinese-made lithium-ion storage batteries would bolster US and allied manufacturers at the expense of Chinese competitors. Worryingly, existing planned tariffs will not close the cost gap between US-made and Chinese-made batteries, according to an analysis by Rahul Verma of Fractal Energy Storage. Additional tariffs on Chinese imports—and incentives for US manufacturers—may be necessary to close the cost gap.
To be sure, additional tariffs on Chinese-made lithium-ion storage batteries will impose short-term costs and slow domestic deployment of clean technologies, especially solar energy. Still, US long-term strategic interests—which include reducing emissions as rapidly as possible—are best served by constraining China’s dual-use technological capabilities and industrial capacity in batteries while advancing related US and allied competencies.
Given the need to jumpstart US and allied battery technological and manufacturing capabilities, additional, accelerated tariffs on Chinese-made Li-ion batteries for both EVs and BESS are appropriate. Additionally, policymakers should collect better data on Li-ion domestic production and make that information public. When placing tariffs on Chinese-made Li-ion batteries, however, policymakers should ensure that the United States, working closely with allies and partners, develop a US battery complex. Outcompeting China in batteries, a vital military and energy technology, is critical for US and allied security.
Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and its Indo-Pacific Security Initiative. He is also editor of the independent China-Russia Report. This analysis reflects his own personal opinion.
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Image: Aerial view of train loaded with CATL's lithium-ion batteries, departing from Guiyang, China on November 19, 2024. (Qu Honglun/China News Service/VCG via Reuters Connect).