[SMM Analysis] US Extends Section 301 Tariff Exemptions Again: Manufacturing Sector Benefits, Battery and Materials Sector Remains Under Pressure

The Office of the United States Trade Representative (USTR) recently confirmed the extension of 178 exclusions from Section 301 tariffs on Chinese imports, which were originally set to expire at the end of 2025, for an additional year, with the new validity period lasting until November 10, 2026. This extension covers general industrial parts such as pumps, valves, gears, bearings, small motors, and filtration components, and also includes key equipment components for PV, semiconductors, and automation equipment. The overall structure continues the previous exclusion system, focusing on basic components and specialized equipment required for industrial manufacturing, while not incorporating key battery materials such as battery cells, cathode and anode materials, electrolyte, and separator.

At the industry level, the impact of this round of exemption extensions on the global new energy supply chain exhibits distinct structural characteristics. For the power battery and ESS battery manufacturing segments, the continued exemption of a large number of key components from additional tariffs will directly reduce the construction costs of production lines in the United States. The alleviation of tax pressure on the equipment side eases the financial burden on U.S. domestic factories for capacity layout, equipment upgrades, and automation transformation, helping related projects proceed according to the original timetable. SMM estimates that the extension of exemptions may reduce the capital expenditure for new or expanded production lines by 1%–5%, and the price competitiveness of equipment exporters will be further enhanced. This indicates that the participation and stability of Chinese battery equipment enterprises in the global supply chain will continue to increase.

Meanwhile, the policy environment for the materials segment of the industry chain has not shown significant relaxation. This exemption extension does not cover battery cells themselves or their core materials, including LFP, NCM cathodes, graphite anodes, separators, electrolytes, LiPF6, as well as key raw materials such as copper foil and aluminum foil. While extending exemptions for the manufacturing segment, the United States continues to strictly control the entry of Chinese materials into its local supply chain through the Foreign Entity of Concern (FEOC) restrictions under the Inflation Reduction Act (IRA). Policy direction indicates that the U.S. remains open to "capacity construction" but maintains vigilance regarding "key strategic materials." This combined strategy strengthens its long-term goal of promoting the development of a domestic materials system and facilitating the localization of supply chains from Japan and South Korea in the United States. In the short term, the difficulty and cost for Chinese materials enterprises to export to the U.S. have not improved. Whether to establish factories in North America to circumvent policy restrictions in the future will become a critical strategic decision point for materials enterprises.

From a global perspective, the policy combination of easing restrictions on manufacturing equipment while tightening controls on materials leads to a new division of labor trend in the new energy supply chain: the United States continues to rely on Chinese equipment, parts, and intermediate process segments to ensure the accelerated formation of domestic battery and ESS capacity; however, it maintains high barriers against materials and battery cells from China through trade tools, subsidy mechanisms, and geopolitical policies. The extension of this round of exemptions maintains the window for cross-border cooperation in the manufacturing sector, but intensifies the competitive nature of the materials sector.

Overall, for manufacturing equipment enterprises, this represents a continuation of the export opportunity window; for the North American market, it is a necessary condition to sustain the expansion pace; and for materials enterprises, it signifies that the high-pressure policy stance remains unchanged. Against the backdrop of accelerated restructuring of the global new energy supply chain, Chinese enterprises will continue to maintain advantages in the equipment sector, but will face longer-term and costlier compliance and localization decisions in the materials sector.