New U.S. Tariff Policy: Implications for Energy and Manufacturing

In an Executive Order signed on April 2, 2025, President Trump has instituted a minimum 10% universal tariff on all imports starting April 5. These 10% tariffs will be additional to “Reciprocal Tariffs” between 10% and 50% on products from about 60 countries starting April 9.

The Trump Administration has calculated these Reciprocal Tariffs based on the ratio of country-level trade deficits with the US divided by the value of US imports from the target country. This ratio is being described as a measure of perceived unbalanced trade practices against the US and the Reciprocal Tariffs are being set at 50% of this value for most countries. We note that there are a variety of reasons for countries to have trade deficits and the existence of such deficits is not, in its own, an indication of unfair or unfavorable trade policies. It merely conveys that the US buys more of a country’s exports than that country buys of US exports and these deficits are a normal part of global trade between nations.

Exceptions

➡️These new tariffs will not apply to goods that have been loaded on a vessel at a port and are deemed to be in transit before the new rates go into effect.

➡️The universal rate will not apply to goods in transit to the US before April 5 and the reciprocal rates will not apply to goods in transit to the US before April 9.

➡️According to the Executive Order, the new tariffs will not apply to certain articles that President Trump has already singled out for current or possible future sector-specific tariffs. Per the National Electrical Contractors Association (NECA), these sectors are steel, aluminum, some downstream products that use steel or aluminum, copper, pharmaceuticals, autos and auto parts, semiconductors, certain critical minerals and energy and energy products.

➡️The tariffs apply only to the non-US content of goods that include US components. However, at least 20% of the value of such goods would have to originate within the US.

Implications for the Energy Sector

The new tariffs will impact a variety of energy related technologies, from solar modules produced in Vietnam to wind turbines made with foreign components. FERC recently released their Energy Infrastructure Update for January 2025, in which they noted that the vast majority of new generating capacity will be in solar and wind. Other equipment necessary for bringing power plants online, like switchgear, transformers, and substation equipment is largely imported and will see costs increase.

The fossil fuel industry is not exempt, either.  Thermal generation equipment, like natural gas combined cycle (NGCC) turbines. Supply is already constrained, and capacity is tied up until about 2029-2031 from Tier 1 suppliers, so added costs will add even more strain.

The broad application of new tariffs is expected to have an impact across the energy sector, from gas turbines to solar modules, just as energy demand is growing nationwide to fuel the growth of the AI sector.

Impacts on the Energy Storage Supply Chain

Many of the countries that supply battery energy storage systems (BESS) to the US market are heavily impacted by the new tariffs. As it currently stands, assuming no other changes, by January 2026, BESS from China will be subject to a total tariff of about 82.4%, as shown below. Clearly, juggling all of the relevant tariffs and duties is a significant exercise with many moving parts.

*HTSUS = The Harmonized Tariff Schedule of the United States

A summary of the major BESS exporting countries to the US and their new tariffs is shown below. Imported BESS from China have a significantly higher expected tariff than most other countries exporting BESS into the US market. The final tariffs on any product, however, will be complicated to determine as the underlying components may, themselves, be subject to additional tariffs (e.g., an Indonesian BESS made with Chinese inputs). This will be most impactful to the lithium iron phosphate (LFP) BESS suppliers in the near term but with no country being exempt from at least some sort of tariff, we can expect a great deal of supply chain adjustment in the months ahead.

Impacts on Battery Storage Pricing

• Based on our tariff tracker, Chinese made DC blocks are now effectively between the $130 - $180 per kWh-dc range (DDP to site), whereas Non-Chinese DC blocks (manufactured in let’s say Indonesia) are between the $115 - $165 per kWh-dc range (DDP to site). Baseline costs are expected to shift in the near term so this gap may narrow or widen further based on macroeconomic conditions.

• The gap between domestically manufactured non-LFP DC blocks and Chinese made LFP blocks is expected to narrow by early next year to about $50-$60 per kWh-dc. This means, if OEMs in this category reduce their prices by about 25-30%, based on current capacity projects, then, domestically manufactured non-LFP BESS will be a more attractive option for buyers based on total cost of ownership, not inclusive of the domestic content adder under the IRA.

• It is to be noted that the American Active Anode Material Producers (AAAMP) filed an AD/CVD petition in 2024 seeking a tariff of up to 910%. This has not yet been adjudicated by the Department of Commerce; however, we expect some movement on this later this fiscal year.

Chart from Camelot Energy Group – Impact of April 5 Tariff on DC Blocks

International Reactions

The scale of the current trade actions is highly likely to elicit stiff responses from the international community. As of this morning of 4/4/25, China has announced a 34% tariff on all US imports, alongside increased export controls affecting rare earth minerals and other key materials exported to the US. While the US is a net importer of most clean energy technologies, US exports of biofuels and components for wind and hydropower systems may be impacted. Perhaps even more impactful, however, would be an increase in export controls that reduce the availability of key input materials. Efforts to onshore lithium-ion battery production, for example, will struggle without a ready supply of high grade graphite for making suitable anodes (currently, despite recent AD/CVD claims, there are no domestic suppliers of graphite who can meet the battery industry’s purity requirements). Also, the majority of equipment used in manufacturing solar cells is currently sold by China, with one recent manufacturer Camelot spoke with indicating the only other option was to buy European equipment at “4x the cost and half the output” compared to the Chinese alternatives. If these trade actions are intended to spur a renaissance of domestic manufacturing, the US is highly vulnerable to interrupted supply chains and export controls from abroad that restrict the very tools we need to build and scale a domestic manufacturing industry.

The global trade situation and its impacts on the clean energy sector are evolving quickly and this is a developing topic. Stay tuned for periodic updates from the Camelot team in the days ahead. Follow us on LinkedIn for the latest insights.

Next Steps for Industry Stakeholders

With growing pressure due to pricing, it is time to carefully evaluate projects and supply chain risks. The Camelot team can help asset owners, investors, and other key stakeholders:

• Perform due diligence on potential new projects, optimizing technology, revenue streams, and asset management strategy

• Establish, strengthen, and diversify supply chains to ensure you have flexibility to keep your projects on track

• Evaluate new technologies that may offer new opportunities, as well as new challenges

The Camelot team combines technical, economic, procurement, and strategic insights to help our clients navigate the changing market. Reach out to Hello@CamelotEnergyGroup.com today. We look forward to hearing how the new tariffs affect your business- and ensuring you get the help you need.

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