The United States and China have had a fraught relationship for decades due to a multitude of factors ranging from differing political ideologies to cybersecurity concerns. Historically, the U.S. and China did not clash much over the energy sector because the US relied primarily on fossil fuels for its power. Now, with the increasing popularity of renewable technologies, China has become a key player in the U.S. energy industry. As a technology and manufacturing powerhouse, China produces many components used for renewable energy such as lithium-ion batteries. China has a growing monopoly on the lithium-ion battery market, a fact that is beginning to raise alarm in the U.S. and is driving yet another wedge between the two countries. 

About the Technology 

Lithium-ion batteries operate by using an anode and cathode system to charge and discharge electrons from lithium ions. Discharging the ions generates energy and charging them stores it; the reversible movement allows for reuse, making it more valuable than traditional batteries and a logical choice for several types of technologies. The most everyday uses of lithium-ion batteries are in electronics such as smartphones, laptops, and electric scooters, but they have rapidly become popular in renewable energy portfolios as well. 

Electric vehicles (EVs) and hybrid electric vehicles, for instance, rely heavily on batteries to store the charge that provides energy for the vehicle to run. There are several types of batteries available for EVs, but lithium-ion types are by far the most commonly used. Their high energy per unit mass and volume, power-to-weight ratio, energy efficiency, long life, performance at high temperatures, and low self-discharge are all factors proving lithium-ion batteries to be the most reliable source of energy for EVs out of all the options on the market today. 

These same advantages have given rise to a new alternative energy technology that uses lithium-ion batteries – battery energy storage systems, commonly abbreviated to BESS. BESS charge from the grid or a generation source, store that energy, and can release it to provide electricity or other grid services when needed. A rapidly emerging technology, BESS can stabilize the intermittency of renewable energy sources like wind or solar, thus adding resiliency to renewables. This is an exciting development for the energy industry as it addresses one of the biggest flaws with solar and wind technology – lack of consistent availability. With BESS, energy produced by wind and solar can be readily available even when the wind is not blowing and the sun is not shining. So far, BESS operators typically charge the system when energy is cheap, such as at night when winds are strongest and demand is low, and release it when energy demand is highest and most expensive. 

BESS can be used both behind the meter (at the electrical distribution level) or at the utility scale. Residential batteries are roughly four feet in height and attach to the wall of the purchaser’s house. They pair with solar panel installations to either control when excess energy is sent back to the distribution grid or store the energy to be used when the home’s energy consumption rate is at its peak. Tesla’s Powerwall is the most well-known residential BESS on the market today, but there are numerous brands in circulation. This particular application of BESS has rapidly become popular on account of the resiliency and financial benefits it brings the homeowner. 

Utility-level BESS works in the same manner, but at a larger scale. It can be paired with a generation resource such as a wind farm or installed at electrical substations, which convert transmission-voltage electricity down to a safer distribution-level voltage. In both of these instances, the BESS acts as a passthrough and storage facility for the generated energy, seamlessly integrating into existing transmission and distribution infrastructure to help balance electric supply and demand. Installing BESS in these locations allows grid operators and generation owners to flatten electrical demand during peak times and ensure more energy is consistently available. 

Market and Production Growth

Due to lithium-ion batteries’ usefulness in EVs and BESS, demand for the batteries has skyrocketed in recent years. A 2022 analysis projected the lithium-ion market to grow by over 30% annually from 2022 to 2030, reaching a size of 4.7 terawatt-hours (TWh) by the end of the decade. Global lithium-ion battery demand is projected to increase sevenfold in the same timeframe, and the market size is poised to reach $200 billion USD this year. 

This raises the question of where these batteries are coming from. In 2022, China accounted for $9.3 billion of U.S. battery imports. The global superpower produces 75% of all lithium-ion batteries, refines more than half of the world’s lithium, and does 60% of the world’s battery component manufacturing. China is also the third largest producer of raw lithium from mines, having produced 14.6% of the world’s lithium, or 19,000 tons, in 2022. This means China largely controls the entirety of the battery production process, and the country’s capabilities are only growing. In 2025, China is projected to have a 2.93 TWh manufacturing capacity for lithium-ion batteries, and by 2030, this capacity will increase to 4.65 TWh. Essentially, China is quickly monopolizing the market for one of this century’s hottest technologies. 

Ramifications 

Chinese monopoly of the lithium-ion battery market has created a global dependence on Chinese batteries. The country has succeeded in monopolizing the market because foreign companies simply cannot compete with Chinese battery prices or with the quantities Chinese manufacturers are able to produce. Therefore, China can control the costs of battery production and, according to an analysis from MIT, “potentially hold it hostage against any other country that relies on these materials.” This means China could begin behaving similarly to the Organization of the Petroleum Exporting Countries (OPEC) and price gouge or even withhold a vital energy resource in order to gain political leverage or make a global statement. Such a scenario would have historical precedence. In the 2010s, the Chinese government withheld rare earth mineral exports to Japan amidst a geopolitical dispute in an attempt to gain leverage. The situation is strikingly similar – at the time of the incident, China held 99% of the world’s supply of the most prized rare earth minerals, which are crucial components of most electronics and many renewable energy technologies. It would thus not be out of character for the Chinese government to use such a tactic and weaponize their control over lithium-ion batteries. Given the batteries’ skyrocketing popularity and ties to key US sectors, China could potentially manipulate the U.S. economy at will if trends continue. 

Both major U.S. political parties have expressed concerns of this nature. A Department of Homeland Security internal report under the Biden administration discussed the possible economic risks of lithium-ion battery dependence. The report warned that reliance on China could negatively impact the development of a secure battery supply chain in the U.S., leaving the country permanently dependent on China for the technology. Furthermore, the Biden administration voiced concerns about the national security threat of incorporating Chinese-made parts into American infrastructure on a grand scale. For these reasons, the Biden administration raised a 25% tariff on Chinese-made lithium-ion batteries specifically for EVs. 

Many Republicans have raised similar concerns regarding the country’s growing dependence on Chinese battery manufacturing. On February 12th, Republican senators Rick Scott and Maggie Hassan introduced a bill entitled the “Decoupling from Foreign Adversarial Battery Dependence Act.” The bill is intended to prevent the Department of Homeland Security from purchasing lithium-ion batteries from six major Chinese sellers. Both senators cited supply chain and national security threats as the driving factors for the legislation. 

Tensions over critical minerals are already manifesting themselves in conflict between the U.S. and Chinese governments. At the start of February, President Trump instituted a 10% additional tariff on all imports from China in an attempt to halt the inflow of fentanyl into the U.S. In retaliation, China expanded export controls on several critical minerals. The list of restricted metals does not include lithium, but the minerals are core components of several renewable technologies such as solar panels and certain types of EV batteries. This exchange demonstrates that geopolitical controversies could feasibly trigger restrictive actions impacting the lithium-ion battery market. 

Final Thoughts 

The U.S.’ demand for lithium-ion batteries is soaring due to the quickly expanding renewable energy industry, which in itself is a positive development. Technologies such as EVs and BESS allow for a more flexible and resilient grid that relies less on fossil fuels, making batteries invaluable for the energy industry. Nevertheless, the origin of lithium-ion batteries poses a formidable problem to their implementation within the U.S. The growing energy dependence arising from a Chinese manufacturing monopoly is worrisome given the country’s capability to weaponize battery exports. Both historical precedence and current events suggest the likelihood of such a scenario. Since both Republicans and Democrats have highlighted this concern, political leaders could work to develop a bilateral method of combating Chinese energy dependence while still fostering domestic use of alternative energy technologies. Given the complexities of the industry and of U.S.-China trade relations, arriving at a solution would prove difficult, yet this issue will not disappear of its own accord. The White House should keep the nuances of this situation in mind throughout its dealings with China and consider seeking a bipartisan solution for battery manufacturing dependence.