US to set 93.5% tariff on Chinese graphite, triggering supply chain shift
In a move to reduce dependence on Chinese critical materials, the United States imposed a preliminary antidumping duty of 93.5% on natural graphite imports from China. Announced by the Commerce Department on July 17, the duty combines with existing countervailing measures to create an effective tariff rate of about 160%.
Graphite plays a key role in electric vehicle battery production, forming the primary material in anodes. China controls more than 90% of global graphite processing capacity, according to the International Energy Agency. In 2023, roughly two-thirds of the graphite imported by the United States came from China.
This measure aligns with the broader goals of the Inflation Reduction Act, which encourages manufacturers to source critical minerals domestically or from free-trade partners. A final ruling is expected by Dec. 5, though the policy shift is already shaping markets and procurement plans.
Global stock markets react to graphite tariff news
The announcement triggered strong reactions in equity markets, especially among non-Chinese graphite producers.
Australia’s Syrah Resources rose as much as 38%. Posco Future M, a South Korean firm active in battery materials, gained 24%. Novonix Ltd., which operates a graphite processing facility in Chattanooga, Tenn., jumped 21%.
Canadian firms, including Nouveau Monde Graphite, also posted gains. Investors appeared to reward companies positioned to replace Chinese suppliers in a reshaped graphite market.
These shifts suggest changing dynamics for procurement leaders and investors. With Chinese graphite becoming more expensive, companies with supply chains in North America or allied countries stand to benefit from increased demand and pricing leverage.
The strategic role of graphite in the EV battery supply chain
Graphite is central to the function of lithium-ion batteries, used in electric vehicles and renewable storage systems. The anode, responsible for storing lithium ions during charging cycles, is typically composed of natural graphite due to its efficiency and lower cost.
Synthetic alternatives are available but less widely used. The United States currently lacks significant domestic graphite production or processing capacity, making it vulnerable to foreign market conditions and regulatory constraints.
China tightened export controls on graphite in 2023, requiring permits for certain types of shipments. This added to industry concerns about supply reliability and triggered efforts to establish alternative sourcing channels.
The IEA classifies graphite as one of the most exposed minerals to potential supply disruption. As countries compete to secure critical materials, building diversified, resilient supply chains has become a top priority.
Inflation Reduction Act and the push for sourcing diversification
The Inflation Reduction Act provides tax benefits only for materials sourced domestically or from approved trade partners. Graphite from China does not qualify, adding to the economic case for reshoring supply chains.
EV manufacturers and battery developers are increasingly evaluating alternatives in countries such as Canada, South Korea, and Australia. Some are also exploring direct investments in US-based graphite processing.
Michael O’Kronley, CEO of Novonix, noted that the new duties are prompting earlier conversations with US automakers. “The cost of graphite imported from China is going to go up,” he said. “This ruling accelerates those discussions.”
These policy levers create a strong incentive to decouple from Chinese materials, especially as companies plan for future capacity expansion and compliance with domestic content rules.
While companies outside China may gain near-term advantages, the long-term outcome depends on how supply chains adapt. Chinese producers such as Hunan Zhongke Electric and Jiangsu Baichuan High-Tech reported limited declines after the announcement, but strategic shifts are already underway.
Analysts expect the United States to use trade policy to stimulate domestic processing capacity. If successful, the strategy could lead to greater control over a critical segment of the battery value chain.
Eugene Hsiao of Macquarie Capital remarked that US trade actions could force battery producers to change suppliers, advancing the country’s graphite capabilities.
Though effective immediately in market terms, the structural transition to localized supply will take time. Companies already invested in diversified sourcing are positioned well. Others may face higher costs or difficulty securing qualified material.
Sources
Bloomberg