The Battery Decoupling Trap: Why Sequencing Matters for U.S. Supply Chain Resilience
Authors: Michael Liu, Director of Research and Insights; Yen T. Yeh, Executive Director and Grayson Shor, Program Director Government Affairs and Policy, Volta Foundation
Volta Foundation recently submitted recommendations to the U.S. International Trade Commission (ITC) warning that abruptly revoking China’s PNTR status for battery products could destabilize the U.S. battery industry before domestic supply chains are ready. Download the full recommendation.
The United States is in the early stages of building a resilient domestic battery supply chain. Factories are under construction. New materials companies are scaling up. But the industry is not yet self-sufficient– and in several critical areas, China remains the only meaningful supplier. Today, China produces 97% of the world’s lithium iron phosphate (LFP) cathode material, the key ingredient in the type of battery used for grid-scale energy storage. Additionally, China produces 93% of the processed graphite used in battery anodes. Most notably, China manufactures nearly all of the world’s LFP battery cells, which is a key product that U.S. energy storage developers depend on to build the battery systems now being deployed across the electric grid.
There is no near-term workaround. A U.S. battery Gigafactory cannot simply switch to a different cathode material supplier the way a manufacturer in another industry might swap one commodity input for another. Battery materials must be tested, qualified, and validated with each specific customer; this is a process that typically takes 18 to 30 months, and in some cases longer. Even if qualification were instant, ex-China supply fails to meet domestic demand. U.S. production of LFP cathode material can supply only about 9 GWh of demand against 65 GWh needed. For graphite, domestic production covers less than 10% of what U.S. cell factories require. New cell manufacturing facilities take three to five years to build and commission. Building the mines, processing plants, and material facilities to close these upstream gaps would take even longer and require tens of billions of dollars of investment.
Revoking PNTR would move Chinese battery materials and cells from standard tariff rates to much higher rates: in many cases, adding 10 to 44 percentage points on top of today’s tariffs. Those cost increases would hit immediately, while the alternatives they are meant to encourage would take years to arrive. The result would be a cost shock to an industry already under significant financial strain. U.S.-made LFP battery cells already cost 56% more than Chinese equivalents, due in part to existing tariffs and supply-chain constraints. Battery pack costs in the United States run 44% above Chinese prices. Utilization rates at several major U.S. battery plants have fallen below 50%. In 2025 alone, $21.1 billion in U.S. battery investments were cancelled or downsized. Layering additional tariffs onto this environment would widen cost gaps, slow factory ramp-ups, and put further investment at risk, ultimately weakening the very manufacturing base the policy is intended to strengthen.
The downstream effects would be significant. The United States deployed a record 18.9 GW of battery energy storage in 2025, and the forward pipeline calls for roughly 500 GWh of battery storage over the next six years.
Nearly all of this storage uses LFP cells, and much of it is tied to critical grid infrastructure – including the utility-scale battery systems being built to support data-center expansion across the Southeast and Mid-Atlantic. In Georgia alone, regulators approved more than 3,000 MW of new battery storage in December 2025 to serve data-center-driven load growth. Battery system prices already rose 56 to 69% in the first half of 2025 during a period of tariff uncertainty, with some manufacturers pausing price quotations entirely. Higher battery costs or procurement delays caused by PNTR revocation would slow these deployments in a defining moment where grid reliability and data-center power supply have escalated to urgent national priorities.
Volta Foundation does not oppose efforts to reduce U.S. dependence on Chinese battery supply chains, as that dependence is a real strategic vulnerability. However, the sequencing matters. Imposing the full cost of decoupling before alternatives exist would fail to accelerate domestic production and instead impair growth at a consequential moment for the battery industry. Factories coming online today need stable input costs to reach full production; investors need confidence that the materials their plants require will be available and affordable; downstream customers need predictable pricing to commit to the large-scale storage projects that, in turn, create the demand domestic manufacturers need to survive.
Volta Foundation urges the Commission to consider a more targeted approach. Rather than an abrupt, across-the-board tariff increase, Volta recommends a phased, milestone-driven tariff schedule that raises rates on battery products only as verified domestic or allied-nation supply becomes available. This should be paired with strengthened federal investment in upstream materials production (particularly lithium processing, cathode manufacturing, and graphite) and with structured partnerships that allow U.S. companies to license more easily bring leading battery technology and bring manufacturing know-how onshore. The U.S. battery industry has its greatest chance of success in building durable self-sufficiency through pragmatic policies. Such policies must include both measured protections to enable a competitive free-trade market as well as sufficient incentives to incubate domestic players. An abrupt transition to higher Column 2 tariffs fails to meet either of those needs.
