The bottom has fallen out of US-China trade ties.
The world’s two largest economies have imposed massive tariffs on each other that will sharply curtail trade between the two sides.
While the disruption will undoubtedly have across-the-board effects on global supply chains, if it is sustained, two markets will be directly and immediately impacted: soybeans and lithium-ion storage batteries.
Though a major and sustained trade spat between Beijing and Washington would undoubtedly inflict major damage on the global economy, it could also provide limited, discrete opportunities for other actors.
For example, Brazil could increase exports of soybeans to the People’s Republic of China, while Taiwan and South Korea could find it economically useful and politically convenient to ramp up purchases of US soybeans.
Meanwhile, the US battery-storage sector faces profound uncertainty due to the tariffs, but it could emerge stronger over the long term.
Imposing large tariffs on China carries undeniable risks—and any decoupling of the two massive economies will bring pain, especially in the short term.
Yet the crisis also presents opportunities to draw the United States and its allies and partners closer on discrete issues, even as broader, US-driven uncertainty continues to persist.
The US-China trade war doesn’t come from nowhere.
Due to China’s export promotion policies, including subsidies, and the United States’ low savings rate, the bilateral goods trade deficit has exploded in recent years, peaking at $418 billion in 2018.
In order to reduce the bilateral goods trade deficit, the United States has imposed several waves of tariffs on Chinese exports.
In response, China has, among other measures, targeted specific goods, such as soybeans, which are a major import it receives from the United States.
China is betting that targeting soybeans will be a pain point for the White House: US soybean farmers are an important political constituency, about half of all their production is shipped abroad every year, and China is the largest single purchaser.
At the same time, China cutting its soybean imports from the United States could also present opportunities for other buyers and markets.
Brazil, already China’s largest source of soybeans, could expand its exports.
On the other side, the European Union, South Korea, and Taiwan could make politically useful and showy purchases of US soybeans as a way of trying to earn favor with the White House before or during their own negotiations on trade or other issues.
Just as the US-China trade war could curtail or even halt soybean trade, the US battery complex could face severe disruptions if the United States and China continue down the road of decoupling.
China is, by far, the largest exporter of batteries to the United States, accounting for over 70 percent of the United States’ lithium-ion battery energy storage system imports in 2024.
These batteries, a single module of which can be as big as a truck, store electricity from the grid (often solar) and discharge power during peak demand periods.
If 145 percent US tariffs on Chinese goods remain in place, Chinese-produced lithium-ion batteries may be priced out of the market, especially since South Korean-made batteries are highly competitive and face only a 10 percent tariff (as of April 10).
Accordingly, US tariffs may see a reorientation of storage-battery supply chains, with fewer imports from China and more from treaty allies such as South Korea, Japan, and Canada.
Without commenting on the other disruptions of the trade war, the reshoring and friendshoring of battery supply chains would hold significant national security benefits.
Advanced batteries are strategically important: in addition to commercial uses, they hold military applications for drones, electronic warfare systems, and submarines.
But it won’t be easy to shift battery supply chains, at least not in the near term.
US allies have limited spare capacity.
The international battery workforce disproportionately consists of Chinese nationals.
China controls critical parts of the supply chain, such as graphite.
And new factories—built in the United States or in friendly countries—will take years to complete.
Significantly, the United States has no domestic manufacturing capacity for lithium iron phosphate batteries, which are highly suitable for grid-scale storage.
It will take time for supply chains to reorient themselves.
If the United States and China move forward with hard decoupling, the US battery-storage sector will face immediate pain.
At the same time, higher tariffs on Chinese-made batteries would incentivize greater manufacturing capacity in the United States and its allies and friends.
In order to compete with China, the United States should pair any tariffs on China with investments in research, development, and manufacturing for batteries and other dual-use, militarily relevant energy technologies.
This situation continues to unfold, highlighting the complexities and interdependencies of global trade amidst escalating tensions between economic superpowers.
image source from：https://www.atlanticcouncil.org/blogs/new-atlanticist/want-to-understand-the-us-china-trade-war-start-with-soybeans-and-batteries/
