The United States’ trade war is fast becoming a spectacle – less a coherent strategy than a revolving stage of threats, reversals and political theatre. On 9 July, US President Donald Trump blindsided global markets by announcing 50% tariffs on copper and Brazilian imports effective from 1 August, while issuing new tariff letters to countries including the Philippines, Iraq and Sri Lanka yet reportedly nearing a trade agreement with the EU after weeks of threatening a 50% tariff.
This seemingly improvisational approach mirrors recent developments with China. After a sharp escalation in early spring, tensions appeared to cool on 12 May, when both sides agreed to a 90-day truce that drastically reduced retaliatory tariffs by 115 percentage points. Yet, the reprieve was brief, with the Trump administration subsequently vowing to sanction companies using Huawei’s Ascend chips – a move that underscores the deep fragility of the US-China trade ‘ceasefire.’
In the coming months, the US’s aggressive trade approach threatens to backfire, with America’s EV industry among the most exposed to China’s retaliation. Given that high EV costs remain a major barrier to widespread adoption in the US, Washington must instead pursue partnerships with Beijing to scale up the domestic manufacturing of LFP batteries and cultivate the consumer buy-in needed for an effective green transition.
US tariff uncertainty sparking global concern
The recent tariff instability rocking US-China trade relations are unfolding against the backdrop of Trump’s self-declared “Liberation Day,” proclaimed on 2 April as the symbolic moment the US would break free from what he decries as unfair foreign competition. Despite the welcome cool-down in trade hostilities, analysts have rightly reminded that US tariffs remain at their highest levels since the 1930s, with tariffs on China still a whopping 30%.
The Trump administration’s ambiguous communications on the scope and scale of its medium-term tariffs have given little room for optimism, lending credence to global fears that the worst is yet to come. Reflecting on the initial tariff hikes on China last March, the country’s Foreign Minister Wang Yi recently cautioned that the ‘law of the jungle’ could emerge from Donald Trump’s protectionist trade policies, with US industry giants notably sharing these concerns.
In a mid-March letter to the US trade representative, Tesla itself voiced concern over the “downstream impacts” of these tariffs on America’s EV industry, which is now exposed to China’s retaliation. Indeed, a trade war would further complicate US efforts to manufacture more affordable EVs – particularly considering the Biden administration’s existing 25% tariff on Chinese EV batteries has already hindered America’s ability to make EVs using cheaper and safer LFP batteries, whose production Beijing has mastered over the past decade.
Domestic policy adding fuel to fire
While Trump’s trade saber-rattling grabs headlines, the real damage to the U.S. auto sector could well come from within rather than from Beijing’s potential retaliation. As The Washington Post reported in late March, Republican lawmakers plan to scrap federal tax credits for EV and battery production and gut funding for the rollout of charging stations.
Industry players had already rolled back EV investments last year amid underwhelming sales, with Tesla notably abandoning plans for a new, cheaper model, and GM delaying its new EV factory and selling its stake in one of its battery factories. Yet, with manufacturers now eyeing major investments to meet rising consumer demand, Washington’s proposed U-turn threatens to pull the plug on a fragile recovery.
As industry experts have rightly highlighted, these policies would boost carbon emissions while slashing EV sales and good-quality manufacturing jobs. A new Princeton University study projects that these plans could reduce domestic EV sales by 40% by 2030, wipe out the business case for every planned EV assembly plant and shutter up to half of those already operating, while placing up to two-thirds of EV battery factories at risk of closure by year-end.
China-US parallel battery developments
The new administration’s axing of industry support comes on top of existing trade barriers on Chinese EVs and batteries increased under the Biden administration, which risks isolating the US from the very technologies that could make its EVs more affordable and widely adopted. Experts are increasingly citing lithium iron phosphate (LFP) batteries as a vital technological solution to close this gap; yet, given China’s market leadership in this ascendant battery technology, further US restrictions would greatly inhibit their integration in the domestic industry.
Ironically, U.S. scientists actually invented this “new” LFP battery technology in 1997. However, while American automakers have prioritised range – a key US consumer demand – and invested in NMC batteries in the ensuing years, China has wisely focused on refining and scaling LFP batteries. Despite their lower driving range per charge compared to NMC batteries – a drawback which Chinese innovation is increasingly rectifying – LFP batteries’ significant advantages have seen them dominate the EV market in China.
Crucially, LFP batteries reduce fire risk, cost less and last longer than the nickel manganese cobalt (NMC) batteries. Using iron instead of price and supply-unstable cobalt – whose high production over the past year is attributable to its status as a by-product of green transition demand-driven copper and nickel mining – LFP batteries are now 20% cheaper and can last up to three times longer than their NMC counterparts.
Global partnership critical to turning the tide
Today, the US is paying the price for its short-sightedness in EV battery investment, both economically and environmentally. Reversing this situation will require a supportive regulatory environment that shields its EV industry from unnecessary tariff hikes and rigid controls on Chinese technology.
The ongoing controversy surrounding Ford’s LFP factory partnership with CATL highlights this tense political climate. Yet, the technology licensing model behind the Ford–CATL deal offers exactly what America needs: a cost-effective, efficient way to ramp up domestic, US-owned LFP battery production and manufacture affordable, high-quality and safe EVs. It would also create the kind of manufacturing jobs Trump claims to champion but which are threatened by his tariff hikes. What’s more, with recent breakthroughs extending the range of LFP batteries, the main barrier to U.S. investment is rapidly disappearing.
Cooperation – not trade wars – is the path forward if the U.S. wants to build a competitive EV industry and deliver a truly inclusive green transition. Looking ahead, cost-efficient LFP batteries will be essential to increasing consumer buy-in – instead of doubling down on tariffs, Washington should focus on building resilient supply chains and enabling their domestic production.
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