Tariffs and Trade Risk in Energy Storage Projects: 2026 Outlook

Tariffs and supply chain integrity remain top-of-mind trade concerns for energy storage projects. The US administration has imposed sweeping tariff regimes and pursued remedies specifically affecting industries critical to energy storage, which have had a significant impact on project development. Within this everchanging environment, companies can take steps in developing their project documents and supply chain strategy to positively position themselves  to proactively address trade concerns and mitigate risk.

TARIFF AND TRADE POLICY AFFECTING ENERGY STORAGE

Storage batteries have been indicated as a priority for border detentions for forced labor evaluation, and we expect to continue seeing those goods identified as a concern. It will be key for companies to understand their supply chain for materials and finished goods and be prepared to respond quickly should US Customs and Border Protection (CBP) issue a questionnaire regarding the use of forced labor in the production of imported merchandise.

Companies with experience responding to these questionnaires understand the time and effort required to complete them to CBP’s satisfaction. Importers that are not manufacturers may struggle to obtain the information that CBP needs to release merchandise from customs custody.

Obtaining CBP approval to release merchandise can take several months or more. It will be critical for such importers to work with suppliers to prepare and submit relevant information, which may be provided directly to CBP to protect business proprietary information. Companies are also increasingly preparing specific contractual provisions related to border detention and the allocation of responsibility for project delay as a result.

Application of US Import Tariffs

While certain tariff programs preceded the second Trump administration, tariffs increased and expanded in many respects over the past year. Tariffs imposed pursuant to Section 301 of the Trade Act of 1974 existed on some Chinese-origin lithium-ion EV batteries and non-EV batteries and non-lithium-ion battery parts. Otherwise, non-Chinese origin storage batteries have not historically been subject to multifront targeted tariff or duty actions.

IEEPA Tariffs

Beginning in the first few weeks of the Trump administration, the president imposed various tariffs unilaterally and with near immediacy through executive order, then through implementation by the responsible agencies.

With the tariffs imposed in February 2025, President Trump was the first president to utilize the International Emergency Economic Powers Act (IEEPA) to impose a tariff on goods from Mexico and Canada and an additional tariff on goods from China based on a declared national emergency of an influx of migrants and fentanyl into the United States. In April, the president declared an emergency concerning trade deficits and imposed tariffs affecting most global trading partners.

That same month, importers began challenging these IEEPA tariffs, arguing that IEEPA does not authorize the imposition of tariffs or, if it does, such authorization is an unlawful delegation of authority from the US Congress. The complaints further argued that trade deficits do not constitute an unusual or extraordinary threat and tariffs do not resolve the declared emergencies. Both the Court of International Trade and Court of Appeals for the Federal Circuit invalidated the IEEPA tariffs, and the case was appealed to the US Supreme Court.

On February 20, 2026, the Supreme Court concluded that IEEPA does not authorize the imposition of tariffs and invalidated the tariffs imposed under IEEPA. The opinion did not address the issue of IEEPA tariff refunds, and importers are working to navigate the various avenues of recourse, including administratively with CBP and in litigation at the Court of International Trade. Read more about the Court opinion and next steps for importers in our LawFlash US Supreme Court Limits Presidential Tariff Powers.

Other tariff programs, including the trade remedies described below, remain in effect following the Court’s decision. Following the publication of the opinion, the president announced that he would be imposing a 10% tariff for 150 days pursuant to Section 122 of the Trade Act of 1974. In making the announcement, the president indicated that the tariffs were necessary to address “balance of payments” issues.

The US Trade Representative indicated that the United States would be seeking to reconstitute the invalidated IEEPA tariffs via other mechanisms, including trade remedy investigations under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974.

Trade Remedies

Other tariffs have followed a months-long process including investigations, industry participation, and a determination of the specific injury, after which remedial actions were imposed. For instance, Section 232 allows the president to impose tariffs if an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the nation’s national security.

Under this section, the process starts when the US Department of Commerce initiates an investigation. It then has 270 days to report its findings to the president. If the report concludes that imports threaten to impair the national security of the United States and the president agrees, he may take several actions to eliminate the negative effects of such imports on US national security.

These actions can include the imposition of tariffs, the use of tariff rate quotas (meaning imports from a designated country are allowed duty-free up to a certain threshold, after which tariffs are imposed), or the use of absolute quotas (meaning that imports from a designated country are allowed up to a certain threshold, after which no imports are allowed until the next quarter), among other strategies.

There are currently active and ongoing Section 232 investigations that affect the energy storage industry, including those on steel, aluminum, copper, and critical minerals.

On February 10, 2025, President Trump published two presidential proclamations, expanding the Section 232 tariffs on imported steel, aluminum, and derivative articles. These proclamations eliminated existing exclusions and exemptions, both at the countrywide and importer-specific levels. These tariffs were later increased to 50%, applied to the value of steel or aluminum content in the imported article.

CBP has stated in published guidance that the value of steel and aluminum content is the total payment for that content, typically represented by an invoice paid by the buyer of the steel or aluminum content to the seller. However, an unpublished document instructs that the determination of steel and aluminum content should be made using the entered value of the good and subtracting the value of any non-steel or non-aluminum components in the finished good. In early February 2026, an importer sued CBP challenging that CBP unlawfully applied the Section 232 duties to the entire value of its imported fasteners, in contravention of published guidance limiting the tariffs to the value of the metal content.

There is also a Section 232 investigation into critical minerals. In January 2026, the president issued a proclamation finding that processed critical minerals and their derivative products—including those essential for battery production, such as lithium, cobalt, nickel, manganese, and graphite—threaten US national security. The administration did not impose immediate tariffs, and instead initiated negotiations to address dependency on foreign supply chains (primarily focused on China).

Derivative products include all goods that incorporate processed critical minerals as inputs. These goods include semi-finished goods (e.g., anodes and cathodes) as well as final products like motors, batteries, radar systems, wind turbines, and advanced optical devices. The proclamation allows the administration to take future action in deploying tools such as tariffs, minimum import prices, or quotas if trade negotiations do not sufficiently reduce reliance on foreign sources.

An extension from his first-term strategy, President Trump continues to view tariffs as methods of both negotiation and revenue generation. With respect to energy storage development—and particularly the supply of batteries and components—which were a priority over both the Trump-Pence and Biden administrations, it seems likely that tariffs would be utilized as regulatory control as well as a negotiating tactic for bilateral trade negotiations.

Antidumping and Countervailing Duties

Antidumping and countervailing duties (AD/CVD) are intended to offset the value of foreign dumping and/or subsidization, leveling the playing field for domestic industries injured by unfairly traded imports.

Dumping occurs when a foreign producer or exporter sells a product in the United States at a price that is below “normal value.” Normal value may be the price at which the foreign producer sells the merchandise in its own domestic market or a third-country market or may be a constructed value based on its production costs plus an amount for profit.

A separate surrogate value-based methodology is used to establish normal values for nonmarket economies (such as China). This entails valuing the nonmarket economy producer’s factors of production using prices or costs from one or more surrogate market economy countries considered to be (1) at a level of economic development comparable to that of the nonmarket economy country of the producer and (2) a significant producer of comparable merchandise. Antidumping duties are intended to raise the prices for foreign imports to align with the “normal value.”

Governments subsidize enterprises or industries when they provide financial assistance to benefit the production or exportation of goods through mechanisms such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. To be countervailable, a subsidy must involve a government financial contribution that confers a benefit specific to a certain enterprise, industry, or region in that country or that is contingent upon the export or use of domestic goods over imported goods in production.

In December 2024, the American Active Anode Producers filed AD/CVD petitions with the DOC and US International Trade Commission (USITC) alleging unfair imports of active anode material from China, with claimed dumping margins of 828% and 921%. Both proceedings moved forward, with the DOC initiating AD/CVD investigations in January 2025 and the USITC determining that there was a reasonable indication that imports were injuring the domestic industry.

The investigations targeted active anode materials of the type used in lithium-ion batteries for battery energy storage systems, electric vehicles, consumer electronics, medical equipment, and other appliances. Throughout the investigation, the scope included active anode material regardless of whether it was imported in a battery or in a subassembly of a battery, such as an electrode.

However, critically, the scope published in the final determination was revised to specifically exclude active anode material that is “incorporated into imports of lithium-ion battery products (such as cells, modules, and packs), electric vehicles, hybrid vehicles, cell phones or battery energy storage systems.” The order does apply to active anode material when entered in a subassembly of a battery, such as an electrode.

The full scope of the order provides as follows:

The merchandise covered by this investigation is active anode material, which is an anode grade graphite material with a graphite minimum purity content of 90 percent carbon by weight, whether containing synthetic graphite, natural graphite, or a blend of synthetic and natural graphite; with or without coating. Subject merchandise may be in the form of powder, dry, liquid, or block form and is covered irrespective of the form in which it enters. Subject merchandise typically has a maximum size of 80 microns when in powder form. Subject merchandise has an energy density of 330 milliamp hours per gram or greater and a degree of graphitization of 80 percent or greater, where graphitization refers to the extent of the graphite crystal structure.

Subject merchandise is covered regardless of whether it is mixed with silicon based active materials, e.g., silicon-oxide (SiOx), silicon-carbon (SiC), or silicon, or additives such as carbon black or carbon nanotubes. Subject merchandise is covered regardless of the combination of compounds that comprise the graphite material. Subject merchandise is covered regardless of whether it is imported independently, as part of a compound, or as a component of an anode slurry, or in a subassembly of a battery such as an electrode. Only the anode grade graphite material is covered when entered as part of a mixture with silicon based active materials, as part of a compound, or as a component of an anode slurry, or in a subassembly of a battery such as an electrode.

Subject merchandise does not include active anode material incorporated into imports of lithium-ion battery products (such as cells, modules, and packs), electric vehicles, hybrid vehicles, cell phones or battery energy storage systems.

Active anode material subject to this investigation may be classified under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 2504.10.5000, 3801.10.5010, and 3801.10.5090. Subject merchandise may also enter under HTSUS subheadings 2504.10.1000 and 3801.90.00. The HTSUS subheadings are provided for convenience and customs purposes only. The written description of the scope of this investigation is dispositive.

This is a welcome outcome for the battery energy storage industry and intermittent renewables in general as it effectively means that finished battery energy storage systems and other downstream lithium-ion battery products will not be subject to the new AD/CVD on active anode material from China.

The Final Affirmative AD Determination and Final Affirmative CVD Determination were published in the Federal Register on February 17, 2026.

ADDRESSING TARIFFS AND TRADE IN PROJECT DOCUMENTS

Mitigating tariff risk in battery energy storage system (BESS) projects is crucial for ensuring project financial viability as tariff changes can significantly impact cost structures and overall project economics. BESS projects often involve the import of specialized equipment and materials such as batteries, inverters, transformers, and control systems.

These components are typically sourced from international suppliers (with China being responsible for around 85% of global battery cell production capacity), which exposes BESS projects to risks arising from changes in import tariffs, duties, and trade regulations, as described above. Such tariff fluctuations can significantly impact project costs, potentially leading to delays, budget overruns, and financial uncertainty.

In the context of engineering, procurement, and construction (EPC) contracts and equipment supply agreements, mitigating the risks associated with tariff and duties changes for imported goods is critical in ensuring the financial stability and timely completion of the project.

Developers are typically responsible for securing financing, managing project development, and ensuring that the project is operational within budget and schedule. While tariff and trade changes are usually perceived as a project risk, EPC contractors generally have discretion as to the timing and sourcing of project equipment and materials, and arguably can reduce their exposure to tariff changes and trade policy.

Nevertheless, given the Chinese dominance in the BESS component markets, BESS EPC contractors are faced with limited supply alternatives and significant tariff and trade risk. As such, it is not uncommon for BESS EPC contractors to shift some or all of the tariff risks to developers by contract (as discussed below) or for developers to independently procure critical equipment for BESS projects, which are then carved out from a contractor’s scope.

This strategy reduces project costs by eliminating any markups that contractors would typically charge developers for procuring critical equipment, which markups may not translate into meaningful enhancement (i.e., wrap) of the original warranties provided by the original equipment supplier.

Given this particular aspect of BESS projects, BESS developers are increasingly opting for direct procurement of equipment at the beginning of the project development lifecycle, securing critical project components (such as batteries, inverters, and other long-lead items) early in the project development process before market conditions or tariffs change. This approach, coupled with clear contractual frameworks with careful allocation of risk among applicable stakeholders, may help to manage tariff fluctuations.

Among its benefits, early procurement provides price certainty and reduced exposure to market volatility, locking in prices of key components before potential increases in material costs or tariff hikes, reducing the risk of unexpected cost escalations due to changes in tariffs or commodity prices.

It also provides supply chain stability, managing potential supply chain delays that may be caused by price fluctuations, tariff changes, trade disruptions, or longer-than-expected lead times for international shipments; ensuring timely delivery of components; and preventing project delays. In addition, depending on the scale of the developer, purchasing in bulk or committing to large quantities can result in discounts from suppliers, further insulating a project from future price increases since suppliers may offer volume-based discounts or price stability commitments when contracts are signed early, further reducing the risk of tariff-induced price hikes.

While early procurement may mitigate some risks, potential changes in tariffs and trade policy still must be addressed in the applicable supply and construction agreements. These risks must be allocated between the developer and equipment supplier or contractor, as applicable. Negotiating fixed-price supply agreements with suppliers and EPC contracts with contractors allows developers to shield themselves from the impact of tariff increases. In these contracts, the price of the equipment or materials is set for the duration of the agreement, protecting the developer from import costs.

Suppliers and contractors typically assume some level of risk related to price increases in raw materials or changes in tariffs, however, if they are unable to commercially provide a fixed-price contract inclusive of all procurement costs—especially given the particularities of the BESS components market—parties may negotiate risk-sharing clauses in their contracts to pass some of the risk back to the developer if tariffs or trade regulations cause some level of unforeseen price increases.

Tariff pass-through and change in tariff relief clauses can allocate either the entirety or a portion of the tariff risk back to the developer. They can be structured in different forms, either by carving out tariff costs from the contract price and invoicing them directly to the developer or by incorporating the cost of tariffs into the contract price and providing for some level of relief if the applicable amount of tariffs originally calculated is subject to change.

The change in tariff can be treated as a change in law or force majeure event or addressed under a specifically tailored provision allocating the particular risk to one of the parties. Those provisions must be carefully negotiated to make certain that risks are addressed in a transparent and predictable manner. The clause should clearly define the events that trigger the pass-through or relief, such as the imposition of new tariffs or changes in existing tariffs that impact the cost of imported materials or equipment.

The clause should also outline whether the developer will capture any potential reductions in tariffs originally included in the contract price via a deductive change order and how the increased or decreased tariff cost will be calculated and quantified. This may be accomplished by delineating in a contract exhibit or annex any pieces of equipment or materials whose tariff costs will be passed through or subject to relief for change in tariff, specifically setting forth in advance original quantities, prices, countries of manufacture or supply, and any tariffs applicable thereto at the time of contract execution and requiring the provision of support documentation from suppliers or customs authorities to properly track and document any changes in tariff costs.

To avoid disputes, the tariff pass-through and change in tariff relief clauses should include provisions for transparency and communication, ensuring that both parties are aware of the tariff risk exposure and can more readily calculate tariff costs and changes and their impact on the overall project cost. Developers can also negotiate limits on the amount or percentage of tariff increases that can be passed through (such as floors, caps, and/or percentage splits), ensuring that suppliers and contractors do not excessively inflate costs and that the burden of tariff changes is shared between the developer and supplier/contractor, rather than being entirely absorbed by one party.

Alternatively, the parties can introduce flexible contractual terms and renegotiation clauses within the supply agreements or EPC contracts, including price adjustment mechanisms that trigger renegotiation in response to significant tariff changes. For instance, if tariffs on key materials increase by a certain threshold, the contract can be adjusted to reflect the new cost structure.

If the parties are unable to agree on the renegotiation terms, the agreement can provide for a roadmap to termination, which may include partial termination if some deliveries of equipment not affected by the tariff changes have already been made. The particularities of each project and the bargaining power of the parties will dictate the extent that the reopeners of contract terms will apply. Ideally, parties should strive for a detailed contractual structure to avoid lengthy negotiations or potential disputes.

Developers, suppliers, and contractors can reduce their exposure to tariff-related risks particular to BESS projects by employing strategies such as early procurement of critical components, long-term supply agreements, tariff pass-through and change in tariff relief clauses, and flexible contractual terms. Clear communication, risk-sharing mechanisms, and a proactive approach to supplier collaboration can reduce the vulnerability of BESS projects to tariff and duties changes and improve their chances of financial success, even in volatile energy markets.