The global battery supply chain is heavily influenced by trade policies, particularly those governing the movement of critical raw materials. Governments implement tariffs, taxes, and regulations to protect domestic industries, ensure supply chain security, or address environmental concerns. These policies directly impact the cost, availability, and sourcing strategies for battery materials such as lithium, cobalt, nickel, and graphite.
One of the most significant trade policy developments affecting battery materials is the imposition of tariffs between the US and China. The US has applied tariffs on Chinese imports under Section 301 of the Trade Act of 1974, targeting a range of products, including battery components. Lithium-ion batteries and certain precursor materials face tariffs ranging from 7.5% to 25%. These measures aim to reduce reliance on Chinese supply chains but have increased costs for US manufacturers. In response, China has retaliated with its own tariffs on US exports, including critical minerals. The trade tensions have forced companies to diversify sourcing, with some shifting supply chains to Southeast Asia or investing in domestic production.
The European Union has taken a different approach by introducing the Carbon Border Adjustment Mechanism (CBAM), a tariff on imports based on their carbon footprint. Initially targeting sectors like steel and aluminum, CBAM is expected to expand to cover battery materials. High-carbon-intensity processes, such as nickel refining or graphite production, could face additional costs when entering the EU market. This policy incentivizes suppliers to adopt cleaner production methods or risk losing competitiveness. For example, Chinese graphite producers, which dominate global supply but often rely on coal-powered processing, may need to invest in lower-emission technologies to maintain access to the EU market.
Another critical policy affecting battery materials is the US Inflation Reduction Act (IRA), which ties electric vehicle (EV) tax credits to domestically sourced or free-trade-agreement-partner materials. To qualify for subsidies, a percentage of critical minerals in EV batteries must be extracted or processed in the US or a partner country. This has accelerated investments in North American lithium and nickel production, as automakers seek compliant supply chains. However, the limited availability of local processing capacity creates bottlenecks, particularly for materials like cobalt, which remains heavily concentrated in the Democratic Republic of Congo.
Indonesia, the world’s largest nickel producer, has implemented export bans on raw nickel ore to promote domestic refining. The policy has succeeded in attracting foreign investment in processing facilities but has also disrupted global nickel markets. Battery manufacturers reliant on Indonesian nickel must now navigate higher costs associated with refined products or seek alternative sources, such as laterite deposits in the Philippines or high-pressure acid leach (HPAL) projects in Australia. The EU has challenged Indonesia’s export restrictions at the World Trade Organization, arguing they distort trade.
Trade policies also intersect with geopolitical dynamics. The US has added several Chinese battery firms to export control lists, restricting their access to US technology. Meanwhile, China has imposed export controls on graphite, a key anode material, citing national security concerns. These measures create uncertainty for global buyers, who must either stockpile materials or find alternative suppliers. South Korea and Japan, both major battery producers, have responded by increasing investments in synthetic graphite or alternative anode technologies to reduce dependence on Chinese exports.
Environmental regulations further complicate trade in battery materials. The EU’s Battery Regulation mandates strict due diligence for raw material sourcing, requiring proof that minerals like cobalt are not linked to human rights abuses or environmental harm. Compliance adds administrative burdens and costs for suppliers, particularly those operating in regions with weaker governance. Similarly, the US has enforced the Uyghur Forced Labor Prevention Act, which bans imports of materials linked to Xinjiang, a major hub for polysilicon and lithium processing. Companies must now conduct extensive supply chain audits or face seizures at customs.
The cumulative effect of these policies is a reshaping of global battery material flows. Traditional trade routes are being disrupted, and new alliances are forming. Free trade agreements, such as those between the US and Australia or the EU and Canada, are gaining importance as avenues for securing preferential access to critical minerals. However, the transition is not seamless. Many alternative supply sources lack the scale or efficiency of established producers, leading to short-term price volatility and supply constraints.
Looking ahead, trade policies will continue to evolve in response to technological advancements and geopolitical shifts. The rise of sodium-ion batteries, which avoid lithium and cobalt, could reduce dependence on contested supply chains. Similarly, recycling initiatives may lessen the need for primary material imports. However, for the foreseeable future, trade rules will remain a decisive factor in the cost and availability of battery materials, shaping the competitive landscape for manufacturers worldwide.
The interplay between tariffs, environmental mandates, and supply chain security creates a complex operating environment for industry participants. Companies must stay agile, adapting procurement strategies to navigate an increasingly fragmented and regulated market. Those that successfully align with policy trends will gain a competitive edge, while others may face rising costs or exclusion from key markets. The battery industry’s growth hinges not only on technological innovation but also on its ability to respond to the shifting sands of global trade policy.