Beijing deploys battery export curbs as trade leverage against Washington

New restrictions target critical energy storage components amid rising US demand

China has introduced sweeping export controls on battery technology and components, marking a significant escalation in its trade dispute with Washington and leveraging its dominant position in a sector increasingly critical to US energy infrastructure and artificial intelligence ambitions.

The restrictions, effective November 8, require Chinese companies to obtain licences from the Ministry of Commerce before exporting large-scale lithium-ion batteries, cathode and anode materials, and battery manufacturing equipment. The measures grant Beijing selective control over supply chains in which it maintains substantial market dominance.

Strategic timing amid surging US energy demands

The controls arrive as US energy demand accelerates, driven primarily by data centre expansion supporting artificial intelligence development. According to Lawrence Berkeley National Laboratory, US data centres more than doubled electricity consumption between 2017 and 2023, with projections suggesting a potential tripling by 2028.

"While it doesn't impact as wide a range of industries as other Chinese export controls, the dominance of China in battery supply chains means they can squeeze hard and it can be felt pretty quickly by US companies," said Matthew Hales, analyst at BloombergNEF.

Chinese grid-scale lithium-ion batteries accounted for approximately 65 per cent of US imports during the first seven months of 2025, according to BNEF data. Emily Kilcrease, director of the Energy, Economics, and Security Program at the Center for a New American Security, noted that "the energy demand piece is the constraint in the US for AI data centre infrastructure."

Supply chain vulnerabilities exposed

The restrictions expose significant dependencies in the US battery manufacturing sector. China controls approximately 96 per cent of global anode production capacity and 85 per cent of cathode capacity, according to BNEF. These components are essential for battery factories recently established across the southeastern United States.

"A lot of the battery factories that have been going up in the Southeast, they're all going to be impacted by this — this is their raw material stream," said Celina Mikolajczak, a battery executive who previously oversaw manufacturing for Tesla and Panasonic's Nevada facility.

Market reaction was swift: Fluence Energy shares declined more than 12 per cent on Friday, the steepest drop since August 12, while Tesla shares fell 5 per cent.

Grid stability concerns mount

Large-scale battery storage has become essential for US grid stability, storing excess renewable energy for release during peak demand periods. US utility-scale battery installations reached 26 gigawatts in 2024, virtually nonexistent a decade prior. Texas alone added 4 gigawatts of capacity last year, sufficient to power approximately 3mn homes.

BNEF projects an additional 136 gigawatts of capacity will be required over the next decade. "Much of that supply will need to come from China and can't be easily replaced by other countries," Hales said.

Complex calculations for Beijing

The export controls present complications for China's battery industry, which faces domestic overcapacity and increasing reliance on overseas markets. Bryan Bille, researcher at Benchmark Mineral Intelligence, questioned "how China intends to enforce its new regime" given these commercial pressures.

Analysts suggest the measures serve dual purposes: trade leverage and protection of technological leadership. "I think they've been very explicit about not wanting to give away core technologies," said Ilaria Mazzocco, senior fellow at the Center for Strategic and International Studies. "I think they really are angling to become the leading power in this industry for decades to come."

Trade talks in jeopardy

The extent of China's enforcement may depend on trade negotiations. Beijing previously reinstated rare earth shipments following an agreement with President Donald Trump's administration in June.

However, Trump responded to the battery export controls by cancelling plans to meet President Xi Jinping in South Korea later this month, threatening an additional 100 per cent tariff on Chinese goods via social media posts on Friday.

Denis Phares, chief executive of battery manufacturer Dragonfly Energy, said the measures "add another layer of complexity to an already tight global supply chain and underscore the importance of accelerating domestic innovation." The company is "actively working to reduce reliance on Chinese-sourced components," he added.