Chinese Tariffs Issue

The tariff regime is shifting again. Most Trump-era tariffs are being paused—except for those targeting Chinese imports. For the energy sector, that’s the only part that really matters. While headlines chase soybeans and semiconductors, the real tension is in the wires: this sizable tariff will have broad implications for projects across the country, and the American grid won’t be spared.

Here’s what that looks like in practice: China supplies roughly 70% of the rare earths we use, ships over $1.9 billion in lithium-ion batteries, and still dominates the global production of solar cells, wind turbine components, and high-voltage transformers. Add a 104% tariff to any of those—and you’re not just nudging prices. You’re distorting timelines, budgets, and supply chains for utilities, developers, and manufacturers.

Below, we break down the seven most important ways Chinese trade touches the American grid—and what happens when that trade gets taxed into slow motion.

1. Lithium-Ion Batteries

These are the heart of everything from grid-scale storage to Teslas to your neighbor’s Powerwall that only kicks on when it’s too late. In 2024, the U.S. imported $1.9 billion worth of lithium-ion batteries from China, a 27% jump over the previous year. China doesn’t just dominate the market—they practically are the market, refining over 70% of the world’s lithium and building batteries at a scale and price no one else touches.

Replacing Chinese supply won’t be impossible, but it won’t be quick. South Korea’s LG Energy Solution, Japan’s Panasonic, and even U.S.-based Kore Power are ramping up production, but capacity is constrained and timelines are long. Previous policies are helping drive domestic buildout, but even optimistic estimates show the U.S. won’t be close to self-sufficient before 2030. In the meantime, tariffs mean either higher prices or project delays—or both.

2. Solar Panels and Cells

Solar might be the poster child for tariff whiplash. The U.S. has spent the better part of a decade trying to wean itself off Chinese-made panels, with mixed success. Even with tariffs and anti-dumping investigations, China still controls over 80% of the global solar supply chain, especially in key components like polysilicon wafers and cells. In 2024, direct U.S. imports of Chinese panels dropped—but only because companies routed them through Southeast Asia.

The irony? Most panels labeled as “Vietnamese” or “Malaysian” are still built in Chinese-owned factories, using Chinese parts. Domestic panel makers like First Solar and Qcells (owned by South Korea’s Hanwha) stand to benefit here, but scaling up to meet national demand isn’t trivial. Projects in sunny states like Texas, Arizona, and Nevada are already facing rising costs—and this new tariff regime could dim the pace even further.

3. High-Voltage Transformers

If lithium is the battery, this is the backbone. High-voltage transformers—those massive, yard-sized boxes that step voltage up or down—are overwhelmingly foreign-made. The U.S. imported $4 billion worth of transformers, converters, and inductors from China in 2024. For decades, American utilities have relied on Chinese manufacturing to deliver the bulkier, higher-voltage units at prices that domestic companies haven’t been able to match.

Unfortunately, this isn’t a market you can just turn on overnight. It takes 18–36 months to build a transformer in the U.S., assuming you can find the steel, the copper, and the workforce. The U.S. has just seven or eight domestic producers, with Virginia Transformer and Prolec GE (a joint venture between GE and Mexico’s Xignux) among the few ready to scale. Every utility trying to modernize its grid just got hit with an unbudgeted line item.

4. Wind Turbine Components

Modern wind turbines are marvels of engineering: 300-foot blades, rare earth magnets in the nacelle, and towers taller than most city buildings. And China makes most of it. From rare earth permanent magnets to steel castings and tower sections, Chinese firms lead globally in wind hardware production. Wood Mackenzie estimates that a 25% tariff alone could raise onshore turbine costs by up to 7%. At 104%, the math gets brutal.

Companies like Vestas (Denmark), Siemens Gamesa (Spain/Germany), and GE Vernova (U.S.) manufacture turbines, but many still source parts from China. Reworking these supply chains will be costly and time-consuming. In the short term, expect fewer new projects, especially in land-constrained or politically difficult states where every dollar already comes with a debate.

5. Rare Earth Metals

The term “rare” is misleading—it’s not about scarcity, it’s about refinement. China refines over 85% of the world’s rare earths, which are critical for everything from EV motors to wind turbine generators to military radar. The U.S. gets 70% of its rare earth imports from China, and there is no instant Plan B.

MP Materials runs the only rare earth mine in the U.S. (Mountain Pass, CA), but even they send material to China for refinement. There’s movement to build a domestic processing chain—with Lynas Rare Earths (Australia) and Energy Fuels (U.S.) stepping up—but that infrastructure is years from scale. In the meantime, higher tariffs mean higher costs across sectors, and for the grid, that includes specialized motors, power electronics, and essential substation gear.

6. Power Electronics and Control Systems

Behind every modern grid upgrade is a nervous system of semiconductors, sensors, and smart controllers. A chunk of this ecosystem—especially lower-end microchips, capacitors, and inverters—still flows through China, even if final assembly happens elsewhere.

While the U.S. is investing heavily in semiconductor manufacturing through CHIPS Act funding, that won’t solve the problem in the short run. Suppliers like ABB (Switzerland/Sweden), Schneider Electric (France), and Eaton (Ireland/US) offer alternatives, but cost structures differ. Expect distribution companies and municipal utilities to face the biggest pinch—many rely on these imports for routine maintenance and small upgrades, not just big infrastructure overhauls.

7. Wires… Yep, Wires.

Insulated electrical wires and cables are fundamental to the transmission and distribution of electricity across the grid. In 2024, the United States imported approximately $3.72 billion worth of insulated wire, cable, and other insulated electric conductors from China. This constituted a significant portion of the total U.S. imports in this category.​

Replacing these imports poses challenges. While countries like Mexico and Canada are also key suppliers—Mexico accounted for about 37% and Canada 22% of U.S. insulated wire imports in 2024—​ shifting the supply chain entirely to these nations or ramping up domestic production would require substantial time and investment. Domestic manufacturers such as Southwire Company and General Cable could potentially benefit from the reduced competition, but scaling up production to meet demand is not an immediate solution.​

The imposition of a 104% tariff on Chinese imports will likely lead to increased costs for insulated wires and cables, impacting infrastructure projects and maintenance across the U.S. electrical grid. This could result in higher overall project costs and potential delays in grid modernization efforts.

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