On May 12, 2025, after trade talks in Geneva, China and the United States announced a mutual rollback of 91% of the retaliatory tariffs imposed on April 8 to 9, effective from May 14. Both countries will retain a 10% baseline tariff and suspend an additional 24% tariff for 90 days.
The U.S. will suspend 24% added duties for 90 days and remove 91% of the retaliatory tariffs. China will adopt a reciprocal approach. The adjustment primarily applies to general tariffs and does not affect specific categories such as fentanyl or tariffs under Sections 232 and 301.
For the battery sector, the overall rate on electric vehicle (EV) batteries remains unchanged at 73.4% (3.4% base + 25% under Section 301 + 20% fentanyl-related + 25% under Section 232). However, tariffs on energy storage batteries drop significantly from 155.9% to 40.9%-64.9% (3.4% base + 7.5% under Section 301 + 20% fentanyl-related + 10% suspended tariffs), restoring a degree of economic viability.
Following the recent tariff rollback, Chinese battery manufacturers are expected to accelerate customs clearance of previously produced but undeclared energy storage cells. Industry sources estimate that China's energy storage battery exports to the U.S. will increase 20–30% month-on-month in May and June.
However, uncertainty remains. Many enterprises are delaying long-term contract signings, adopting a wait-and-see approach pending the outcome of ongoing trade negotiations. The U.S. will conduct its tariff adjustment talks in two rounds involving 18 countries each. Approximately 24% of negotiations require prior bilateral conclusions between the U.S. and other countries, meaning the final scope of tariff reductions may evolve. For Chinese exporters, if final tax levels undercut those from Southeast Asian nations, the economic rationale for transshipment via third countries would weaken, reducing the need for complex rerouting strategies.
On the lithium demand side, sentiment is shifting from pessimism to cautiousness. The original 155.9% tariff essentially eliminated the economic viability of Chinese storage battery exports, leading to a 2025 lithium carbonate demand forecast downgrade from 1.40 million to 1.32 million tonnes. The removal of China's mandatory power allocation policy further suppressed demand expectations.
However, with new effective U.S. tariffs lowered to 40.9%-64.9%, Chinese storage products regain some cost advantage, yielding an estimated internal rate of return (IRR) of 12%. This has led to partial demand recovery, and lithium carbonate demand in 2025 is expected to reach 1.35 million tonnes, an increase of 30,000 tonnes from earlier estimates.
In response to persistent high tariffs on China's key export sectors -- including photovoltaics, EV batteries, and electric vehicles -- the U.S. is expected to maintain steep duties not only on Chinese products but also those routed through Southeast Asia. This may pressure Chinese companies to accelerate overseas manufacturing plans, and leading firms may also increase investment in next-generation technologies such as solid-state and sodium-ion batteries.
Meanwhile, lithium prices continue to decline. CIF prices for Australian spodumene have fallen below USD 700/t, with further downside risk as inventories remain high (China's lithium concentrate stockpiles are estimated at 700,000 tonnes). Amid aggressive selloffs by traders, short-term prices could drop to USD 600/t. Nevertheless, this trend is easing cost pressures across the supply chain. On April 24, Australia's Liontown Resources reported Q1 2025 financial results showing a 21% quarter-on-quarter drop in operating costs to USD 512/t (FOB SC6) and an 11% decline in AISC sustainable development cost to USD 678.
Written by Cora Ji, jiruyan@mysteel.com
