Trump’s tariffs and tax plan threaten US battery industry just as it begins to take off

In a brightly lit LG Energy Solution factory in Holland, Michigan, robots were conducting final test runs. The plant had just begun producing large battery cells for energy storage — slim silver pouches meant to store solar and wind power for later use on the electric grid. These batteries are crucial in managing energy demand during extreme heat or cold when electricity use spikes. The plant is one of the few in the country making such batteries, marking a key moment in the US’s effort to catch up with China’s dominance in battery production, the New York Times reported.

Grid batteries can help keep power stable and prices down

As renewable energy grows, large-scale batteries are becoming central to managing power supply. They absorb energy when the sun is shining or the wind is blowing, and release it when demand peaks. Without them, utilities would have to spend far more on power plants and transmission lines — investments that could drive electricity prices higher. States like California and Texas, with significant solar and wind infrastructure, are increasingly relying on grid batteries to bridge the gap between supply and demand.

But tariffs on China are already raising battery costs

President Trump’s renewed tariffs on Chinese imports are hitting the battery sector hard. In April, US tariffs on Chinese batteries spiked to over 150%, prompting companies to halt imports. Though they’ve since been temporarily lowered to 30%, uncertainty looms. LG and other US-based companies depend on battery components that currently come from China — and rapid changes in trade policy are already forcing delays and reducing profits. Fluence Energy, a US storage provider, cut its revenue forecast by 20% in response to the shifting policy environment.

A Republican budget bill could eliminate battery tax credits

While tariffs have already rattled the industry, a Republican-led budget bill poses an even bigger threat. The legislation would end federal tax credits for producing and installing energy storage batteries — a move BloombergNEF analysts described as a “kill switch.” Without these incentives, US battery manufacturers like LG say their operations could become unprofitable at current market prices. Tesla and other companies have warned the changes could stall or reverse growth in their energy storage businesses.

Uncertainty is freezing billions in clean energy investments

Executives say the problem isn’t just cost — it’s unpredictability. “Investment, especially big investment, hates uncertainty,” said Tristan Doherty, head of LG’s US energy storage unit. The company has poured $1.4 billion into expanding its Michigan factory to produce LFP (lithium iron phosphate) batteries, the same type widely used in China for grid storage. Another manufacturer, AESC, recently began making similar batteries in Tennessee. But such large-scale investments take years to plan and can be easily derailed by sudden policy changes.

The US is years behind China in battery production

China recognised the potential of LFP batteries decades ago and now dominates their production. In the US, battery companies largely focused on nickel- and cobalt-based batteries

for electric vehicles. Now, as demand for grid storage rises, domestic production of LFP batteries is just beginning. LG’s Michigan plant is expected to supply over a quarter of US demand once fully operational — but only if the economics remain viable. Currently, most LFP battery materials still come from China, though LG plans to cut out Chinese sources by early 2026.

Clean energy growth may depend on stable policy

Battery innovation in the US is at a turning point. The country’s ability to store renewable energy and keep power prices stable depends on rapidly scaling up battery production. But with trade uncertainty and tax credits on the chopping block, manufacturers are hesitating. As LG’s Doherty put it, “Too much, too fast can kill us.” The outcome of current policy debates may determine whether the US becomes a serious player in battery storage — or falls behind again in a clean energy race it can’t afford to lose.