William Alan Reinsch, Meredith Broadbent, Thibault Denamiel, and Evan Brown
Introduction
The supply chains for lithium-ion batteries (LIBs) illustrate the intertwining of national security concerns with climate and trade policies, as the United States aims to strengthen supply chains by relocating production of essential items, including those vital for meeting climate objectives, back to domestic or nearby shores. The LIB supply chain spans globally, but key inputs and processing capabilities are concentrated in a few countries. This combination of dispersion and concentration makes the global supply chain vulnerable to geopolitical disruptions and changes in trade relations. Compounding this challenge is China’s dominance in lithium-ion manufacturing, particularly in processing mineral inputs and producing key end products like electric vehicles (EVs), alongside its status as an economic rival and strategic adversary to U.S. interests.
Need for Policy Adjustments
The Biden administration appears to have three primary objectives: reducing reliance on China for crucial manufacturing, reshoring manufacturing to the United States to regain lost jobs and resilience, and accelerating the shift away from hydrocarbons to mitigate climate change in line with international agreements. However, these goals present contradictions. Reducing dependence on China and bringing manufacturing back to the United States would enhance supply chain resilience but might impede progress toward climate goals. Conversely, liberalizing trade with China could facilitate scaling up manufacturing and access to affordable inputs, supporting decarbonization efforts at the expense of supply chain security. Balancing these objectives requires a nuanced policy approach.
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