[SMM Analysis] Impact of US Tariff Adjustments on China's New Energy Terminals After the "Geneva Talks"

On May 12, the Ministry of Commerce website released a joint statement on the China-US Geneva Economic and Trade Talks, in which both sides committed to taking the following measures before May 14, 2025:

The US will (1) revise the ad valorem tariffs imposed on Chinese goods (including goods from the Hong Kong Special Administrative Region and the Macao Special Administrative Region) as stipulated in Executive Order 14257 dated April 2, 2025. Specifically, a 24% tariff will be suspended for the initial 90 days, while the remaining 10% tariff on these goods will be retained as per the provisions of the executive order; (2) cancel the tariff hikes on these goods imposed under Executive Order 14259 dated April 8, 2025, and Executive Order 14266 dated April 9, 2025.

China will (1) correspondingly revise the ad valorem tariffs imposed on US goods as stipulated in Announcement No. 4 of 2025 by the Customs Tariff Commission. Specifically, a 24% tariff will be suspended for the initial 90 days, while the remaining 10% tariff on these goods will be retained, and the tariff hikes on these goods imposed under Announcement No. 5 and No. 6 of 2025 by the Customs Tariff Commission will be canceled; (2) take necessary measures to suspend or cancel non-tariff countermeasures against the US that have been in place since April 2, 2025.

After taking the above measures, both sides will establish a mechanism to continue consultations on economic and trade relations.

Starting from April 2, 2025, Eastern Time, China and the US have imposed reciprocal tariff hikes on each other in multiple rounds, eventually reaching a reciprocal tariff level of 125%. However, NEVs and their parts were exempted as they had already been subject to additional tariffs under Section 232. After the negotiations between China and the US, during the 90-day period from May 14 to August 12, for China's exports to the US, only the reciprocal tariff portion will be reduced to 10%, while the 20% tariff on fentanyl and tariffs such as Section 301 and Section 232 will be retained. Starting from August 12, the reciprocal tariff will increase to 34% again.

From May 14 onwards, the tariffs on China's new energy end-use products exported to the US will be as follows:

Overall, due to the exemptions for NEVs and their parts before and after the adjustment of reciprocal tariffs, the changes in reciprocal tariffs will have a greater impact on the export of ESS batteries.

On April 3, 2025, the US imposed a 125% reciprocal tariff on China, leading to a peak tariff of 155.9% on ESS battery cells exported from China to the US, almost halting the direct export of Chinese ESS battery cells and energy storage systems to the US. This 90-day window period is bound to trigger a surge in exports by Chinese ESS enterprises. Nevertheless, due to China's advantages in production costs, battery cell performance, and capacity and production of ESS battery cells, their competitiveness in the US market remains strong even under a 40.9% tariff policy.

Considering the installation rush demand for ESS in the context of the [grid connection deadline (May 31)] mentioned in China's Document No. 136, the ESS battery cells produced in May may not be able to meet the installation rush in the same month in a timely manner. Therefore, the market previously expected that the production volume of ESS battery cells in May would decrease by 5-10% MoM compared to April. However, given the golden export window period brought about by the recent US tariff changes, as well as the approximately one-month shipping and customs clearance time from China to the US, it is expected that the production schedules for ESS battery cells among top-tier enterprises will remain robust in May and June. The growth rate of ESS battery cell production may turn from negative to positive on a MoM basis.

Finally, there are still many uncertainties to note. After March 3, 2025, Trump made multiple adjustments to tariff policies, resulting in significant uncertainty regarding the effectiveness of the policy cycle after this round of tariff adjustments. Additionally, as the total tariffs imposed by the US on ESS battery cells still amount to 40.9%, which remains at a relatively high level, further negotiations are needed between US owners and Chinese ESS producers regarding the sharing ratio of tariff burdens. Lastly, the 90-day window period for this round of tariff policy adjustments will inevitably lead some domestic enterprises to rush exports further. However, considering the current high inventory levels of ESS battery cells in the US, there is also significant uncertainty regarding the scale and pace of subsequent rushed exports.

SMM New Energy Industry Research Department

Wang Cong 021-51666838

Ma Rui 021-51595780

Feng Disheng 021-51666714

Lv Yanlin 021-20707875

Zhou Zhicheng 021-51666711

Zhang Haohan 021-51666752

Wang Zihan 021-51666914

Wang Jie 021-51595902

Xu Yang 021-51666760

Chen Bolin 021-51666836