The tariff on batteries for energy storage systems (ESS) imported from China by the United States will increase from 40.9% this year to 58.4% next year. As China dominates the U.S. ESS market, the Trump administration's decision to impose high tariffs on Chinese corporations has prompted South Korean battery firms to expedite their entry into the U.S. ESS market.
According to the battery industry on the 1st, the tariff on ESS batteries imported from China to the United States will be 58.4% next year. While the basic import tariff (3.4%), mutual tariff (10%), and fentanyl-related retaliatory tariff (20%) will remain the same, the tariff imposed on Chinese imports under Section 301 of the Trade Act is set to rise from 7.5% to 25%. Section 301 of the Trade Act is a law that allows the U.S. to take retaliatory measures against unfair trade practices by foreign governments.
With the high tariff applied to Chinese batteries for ESS, the price competitiveness of these batteries is expected to virtually disappear. The market expects that the price of Chinese lithium iron phosphate (LFP) battery cells supplied to the United States will rise from about $73 per kilowatt-hour (kWh) last year to about $87 next year.
Considering that the price of battery cells produced by domestic battery firms in the United States is about $85 to $90, the difference will almost disappear. According to Romotion, a global electric vehicle and battery research company, the market share of Chinese batteries for ESS in the U.S. is over 80% as of 2024.
The implementation of the Trump administration's tax cut law, known as the "One Big Beautiful Bill Act (OBBBA)," comes with a condition that, starting in 2026, to receive investment tax credits (ITC) and advanced manufacturing tax credits (AMPC) for ESS batteries, companies must not receive support exceeding a certain level from "foreign corporations of concern," including those from China, which presents an opportunity for South Korean battery firms.
Starting next year, for ITC eligibility, components provided by foreign corporations of concern must not exceed 45% of manufacturing costs. An industry official noted, "Local ESS project operators in the U.S. want to source batteries from companies other than China, depending on U.S. government policy. The alternative can only be Korea."
LG Energy Solution, Samsung SDI, and SK On are moving to target the U.S. ESS market. LG Energy Solution began mass production of LFP batteries for ESS at its plant in Holland, Michigan, in June. LG Energy Solution also announced that its backlog of U.S. ESS orders surpassed 50 GWh during its second-quarter earnings announcement. In response, LG plans to increase its U.S. ESS battery production capacity from 17 GWh this year to 30 GWh next year.
Samsung SDI will begin production of ternary batteries for ESS starting at the end of this year. In the second half of next year, the company plans to further expand its production facilities for LFP batteries for ESS. SK On, which has not yet entered the ESS market, is rushing to achieve order results within the year. A SK On official stated, "We are in discussions with several ESS corporations regarding battery supply and will be able to announce results soon."
LG Energy Solution and Samsung SDI plan to unveil new ESS battery products at the "RE+2025" event in Las Vegas, which will take place from the 8th to the 11th of this month. LG Energy Solution plans to introduce a new LFP product in square form that is cheaper than pouch and cylindrical types, in which it has held strengths. Samsung SDI will showcase the first battery to introduce LFP batteries for ESS.
With the demand for electric vehicle batteries decreasing, securing the U.S. ESS market could help improve the revenue of the three South Korean battery companies. Typically, electric vehicle batteries conclude with delivery, but ESS contracts involve delivery and management within a year, allowing for higher unit prices. An industry official commented, "The U.S. ESS market is a target that the three battery companies must pursue."