The U.S. - China Trade Deal and Its Impact on Lithium
A summary from the White House was published outlining the new trade deal with China, reached this week in the Republic of Korea between President Donald J. Trump and President Xi Jinping. The agreement is designed to strengthen U.S. economic and national security while supporting American workers, farmers, and families.
Key points include halting the flow of fentanyl precursors into the United States, removing export controls on rare earth elements and other critical minerals, ending Chinese retaliation against U.S. semiconductor and major companies, and opening China’s market to U.S. soybeans and other agricultural exports.
It also appears China will suspend not only the restrictions imposed by Announcement No. 58, which pertain to lithium-ion cells, components, and the equipment needed for their manufacturing, but also the recently imposed rare earth restrictions from Announcements No. 61 and 62.
This morning, my focus was on this part of the fact sheet:
“The United States will further extend the expiration of certain Section 301 tariff exclusions, currently due to expire on November 29, 2025, until November 10, 2026.”
This concerns the 174 items that have been excluded and extended periodically. While the actual items are not publicly available, they can likely be requested from the U.S. Trade Representative (USTR). If there are exclusions that are related to lithium-ion, they would pertain to manufacturing equipment. The main lithium related tariffs remain active and have not been included in any temporary exclusion.
8507.60.0010 – Lithium-ion batteries for electric vehicles
Unofficial Article Description
Lithium-ion batteries of a kind used as the primary source of electrical power for electrically powered vehicles of subheadings 870340, 870350, 870360, 870370 or 870380
Modifications to the Actions Resulting from the 2024 Four Year Review – 25% duties in 2024 (September 27)
8507.60.0020 – Lithium-ion batteries, other (non EV)
Unofficial Article Description
Lithium ion batteries: Other
Modifications to the Actions Resulting from the 2024 Four Year Review – 25% duties in 2026 (January 1)
2825.20.00 – Lithium oxide and lithium hydroxide
Unofficial Article Description
Lithium oxide and hydroxide
List 3 (Modification) – 25% duties (September 24, 2018)
2825.30.00 – Lithium carbonates
Unofficial Article Description
Lithium carbonates
List 3 (Modification) – 25% duties (September 24, 2018)
Now when it comes to the reciprocal tariffs lithium-ion and the main chemicals needed for their production not only from China but all countries were already excluded per the Annex II document.
2833.24.0000 – Nickel sulfate
2833.29.1000 – Cobalt sulfate
2833.29.4000 – Manganese sulfate
2504.10.0000 – Natural graphite (in powder or flake form)
2504.90.0000 – Natural graphite (other forms)
3801.10.0000 – Artificial graphite
3801.20.0000 – Colloidal or semi-colloidal graphite
8507.60.0000 – Lithium-ion batteries
2825.20.0000 – Lithium hydroxide
2836.91.0000 – Lithium carbonate
Of course with graphite that is a whole new can of worms with proposed tariffs possibly going into affect in December that are up to 160%.
But the main Section 301 tariffs have not changed, so this confirms that starting January 1, 2026, all standalone lithium‑ion cells, including those intended for use in battery energy storage systems, will be subject to an additional 25 % duty. This is one of the reasons Tesla has been pushing to establish an LFP manufacturing facility to produce cells for its Megapacks.
While LG is manufacturing LFP in the United States, and Tesla plans to purchase cells from them, most of the current U.S. OEMs’ production is focused on NMC, with some LFP allocated for EV use, such as with Ford. With the rapid growth in demand for battery energy storage systems (BESS), increased domestic LFP manufacturing will be necessary, or the infrastructure and AI projects will bear the financial burden of tariffs from China.
Technical reasons LFP is preferred for battery storage:
Thermal stability: LFP has iron phosphate chemistry that is inherently less prone to thermal runaway compared with nickel cobalt aluminum (NCA) or nickel manganese cobalt (NMC) chemistries, making it safer for large scale stationary applications like battery energy storage systems.
This is also why cascade utilization, or second use, of NMC and NCA cells is less common. Their higher thermal and chemical instability after automotive use increases the risk of thermal runaway, requiring additional safety systems and infrastructure for deployment in BESS.
Voltage curve: LFP exhibits a flat voltage profile throughout discharge, which reduces the need for additional balancing components in a BESS. Unlike sodium‑ion cells, which have a wide voltage swing and require more complex inverter systems and supporting infrastructure, the flat LFP curve allows simpler system design and lower capital costs for energy storage deployments.
The need for more complex balancing and inverter systems due to their sloped voltage curves adds additional safety and infrastructure requirements, making second‑use NMC and NCA cells more expensive to deploy compared with LFP.
Cycle life: LFP cells maintain capacity over 3,000–5,000 cycles at typical depth of discharge, much higher than NMC or NCA cells, which typically degrade after 1,000–2,000 cycles.
Combined with faster capacity degradation, second‑use NMC and NCA cells have a shorter effective lifespan, reducing their overall cost effectiveness.
Round trip efficiency: LFP batteries achieve approximately 90–95% round trip efficiency, meaning minimal energy loss during charge and discharge cycles.
Response time: LFP cells can adjust power within milliseconds, supporting frequency regulation and rapid grid stabilization. This fast response is critical for AI applications, where computing systems can switch on and off or change load requirements in the blink of an eye. For example, when an AI platform is performing training and experiences sudden, large power draws, LFP ensures stable voltage and frequency for seamless operation.
In comparison, zinc‑based systems are suitable for large grid‑scale storage, but for AI applications they are less than optimal due to slower electrochemical kinetics, resulting in longer response times and reduced effectiveness in rapid power fluctuations. This fast response capability makes LFP the current and continued preferred cell chemistry for AI applications.
DISCLAIMER: This article should not be construed as an offering of investment advice, nor should any statements (by the author or by other persons and/or entities that the author has included) in this article be taken as investment advice or recommendations of any investment strategy. The information in this article is for educational purposes only. The author did not receive compensation from any of the companies mentioned to be included in the article.
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They know just stop not delivering rare earths and metals for a while . And this will slow down a lot of western mines for a lot longer. A lot longer than when the imports stop again.