This past May, the Biden administration announced an increase in Section 301 tariffs on various Chinese imports, including batteries and related components. To better understand the implications of this decision, we sat down with Suzanne Leta, VP of Policy and Advocacy, Americas, at Fluence.
In this Q&A, Suzanne breaks down the complexities of the new tariff structure, its potential impact on our industry, and how Fluence is preparing not just to adapt, but to thrive in this changing environment. She also explores the global economic and political factors driving these shifts and how they fit with—or challenge—global clean energy goals.
%202.jpg?width=330&height=330&name=0KBR0233-web-size%20(3%20of%203)%202.jpg)
Can you provide a comprehensive overview of the increased U.S. Section 301 tariff on non-EV batteries imported from China starting in 2026, and explain how it differs from the current tariff structure?
The Biden administration's announcement marks a significant shift in the tariff framework for the energy storage industry. Under the new structure, the Section 301 tariff rate on lithium-ion non-EV batteries imported from China will increase from the current 7.5% to 25%, effective January 1, 2026. This change specifically targets "batteries" as defined by U.S. Customs and Border Protection, encompassing battery cubes, modules, and certain types of cells.
It is crucial to note that this adjustment does not affect all battery-related imports equally. The tariff rate on battery "parts"–including separators, electrolytes, cans, and electrodes–will remain at its current 25% level. This approach reflects the administration's strategy to encourage domestic production of complete battery systems while maintaining consistent policies on component parts.
The nearly two-year lead time before implementation is a key feature of this policy change. This extended timeline seems designed to give industry players ample opportunity to adapt their supply chains and potentially ramp up domestic production capacity. It is a clear signal of the administration's intent to reshape the energy storage sector in the U.S. while balancing the need for economic competitiveness with the realities of global supply chains.
How specifically will the increased U.S. tariff impact Fluence's operations, supply chain, and competitive position in the market?
At Fluence, we have long recognized the importance of a resilient and diversified supply chain. This forward-thinking approach has positioned us favorably to navigate these new tariff structures with minimal disruption to our operations. Our domestic product, which utilize U.S.-manufactured cells and modules and are available for delivery starting in early 2025, are insulated from the effects of this tariff increase. For our non-domestic products, the 2026 implementation date provides us with a strategic window to further adapt our supply chain strategies.
Gridstack Pro is available with US-manufactured 305Ah LFP cells produced in an existing factory in Tennessee – enabling Fluence to bring domestic content systems to market in early 2025.
First, we have already been proactive in securing domestically manufactured cells that align with current Inflation Reduction Act (IRA) domestic content requirements. Our multi-year agreement with AESC, which is ramping up domestically manufactured cells for Fluence now, exemplifies this foresight. Moreover, we are actively broadening our supply base beyond China. This diversification strategy not only mitigates tariff impacts but also enhances our overall supply chain resilience.
From a competitive standpoint, we believe these changes could ultimately strengthen Fluence's market position. Our early investments in domestic supply chains and our ability to provide products meeting IRA domestic content requirements may give us a distinct advantage over competitors more heavily reliant on Chinese imports.
What do you see as the primary global economic and political factors driving these tariff implementations and proposals in different markets?
The landscape of global trade is being reshaped by a confluence of economic, political, and environmental factors. At the forefront is a growing concern about over-reliance on a single country, particularly China, for critical technologies and materials. This anxiety extends beyond mere economic considerations into the realm of national security, driving many countries to reevaluate their supply chain strategies.
Simultaneously, there is a push for economic competitiveness, with many nations, including the U.S., seeking to revitalize domestic manufacturing in strategic sectors like clean energy. This trend is closely tied to efforts to combat climate change, as governments implement policies to accelerate the transition to clean energy, which includes nurturing domestic clean tech industries.
Trade imbalances, particularly with China, continue to be a point of contention. Many countries are implementing policies aimed at addressing perceived unfair trade practices and reducing trade deficits. These efforts often manifest in tariff structures like the one we are discussing today.
The COVID-19 pandemic served as a wake-up call, highlighting vulnerabilities in global supply chains. This has prompted a renewed focus on supply chain resilience, with many countries now prioritizing domestic production of critical goods.
These factors are not operating in isolation but are interconnected, creating a complex policy environment that companies like Fluence must navigate. Understanding these drivers is crucial as we develop strategies to not only comply with new regulations but to thrive within them.
Existing Fluence Gridstack Production, Utah, USA
How do these tariffs align or potentially conflict with global efforts to accelerate the clean energy transition?
The interplay between these tariffs and global clean energy efforts is nuanced and multifaceted. On one hand, these measures could significantly boost domestic clean energy manufacturing, fostering more resilient supply chains for the energy transition. This localization of production could accelerate innovation and drive cost reductions in domestic manufacturing, potentially leading to more affordable clean energy solutions in the long term. Moreover, by reducing reliance on imports, these policies could enhance energy security–a key benefit often cited in support of the clean energy transition.
However, we must also consider potential conflicts. In the short term, these tariffs could increase the cost of energy storage systems, potentially slowing the pace of deployment. They might also limit access to the current global pool of low-cost suppliers, which could impact the speed of installations. There is also the risk of retaliatory measures from China, which could disrupt global cooperation.
At Fluence, we believe that with strategic planning and execution, these policies can support both domestic industry growth and the global clean energy transition. Our focus remains unwavering: providing efficient, cost-effective energy storage solutions to accelerate the clean energy future, regardless of the policy environment.
We see our role as not only adapting to these changes but as active participants in shaping a future where domestic manufacturing strength and global clean energy goals are mutually reinforcing. By continuing to innovate, we aim to play a pivotal role in navigating these complex waters and driving forward the clean energy transition on a global scale.
Do you have any closing comments?
While our discussion has focused on tariffs, it is important to address a closely related aspect of national security that is driving many of these policy decisions: cybersecurity. At Fluence, we understand that the resilience of our energy storage solutions is inextricably linked with the security of the grid itself. This is why we have made our approach to cybersecurity proactive and comprehensive, much like our strategy for navigating the changing tariff environment.
Our energy storage solutions integrate secure, logically isolated network architectures, advanced encryption protocols, and continuous monitoring systems to detect and mitigate potential threats from the beginning. In addition, Fluence system software is developed by Fluence in the U.S., Germany, and India, with associated battery pack management system hardware manufactured in Hungary. Fluence inverter suppliers are from the U.S., Spain, and Germany.
Want to learn more about energy storage solutions that qualify for the 10% ITC domestic content bonus under the IRA?
The blog is subject to Fluence’s disclaimer’s regarding forward-looking statements.
