Lithium prices have dropped to their lowest in three years, raising key questions about the future of EVs and batteries. What’s behind the slide? As China tightens its lead in battery production, the U.S. faces roadblocks, tariffs, policy shifts, and import dependence. Can the U.S. close the gap? Will cheaper lithium help or hurt the industry? The answers could shape the next wave of the global clean energy shift.
Lithium Prices Hit 3-Year Lows Amid Oversupply and Trade Tensions
In April 2025, lithium prices plunged to their lowest in over three years due to an oversupplied market and escalating trade tensions.
In the latest quarter lithium report, S&P Global highlighted,
- By April 16, lithium carbonate prices in China fell 5.4% to 70,000 yuan per tonne. It’s the lowest since January 2021.
- Similarly, prices for lithium carbonate shipped to Asia dropped 5.3% to $9,000 per tonne, the weakest since February 2021, according to Platts data.
China’s Battery Boom Pushes Supply Higher
China’s lithium production surged in March 2025 as refiners ramped up post-Lunar New Year and new plants began operations. This influx of supply intensified the downward pressure on prices.
At the same time, China’s traction battery output soared 55.6% year-on-year in Q1 2025, underscoring the country’s dominance in the EV battery market.
In March alone, 56.6 GWh of power battery installations happened in China, a 61.8% jump from 2024, driven by rapid EV adoption.
Major firms like CATL and BYD now hold over 65% of the domestic market, further reinforcing China’s position as the global leader in battery innovation and supply.
Technology Gains and Falling Battery Costs Drive Growth
Rapid advances in battery technology, including improved lithium-ion and solid-state batteries, are boosting energy density, safety, and charging speed. These upgrades are making electric vehicles more appealing to drivers and fleet operators alike.
At the same time, battery prices are dropping fast. In 2023, lithium-ion battery costs averaged $139/kWh and are projected to fall to $113/kWh by 2025, driven by larger economies, innovation, and smarter manufacturing.
US Still Relies on Lithium Imports Despite Push for Domestic Supply
Despite growing demand, the US continues to rely heavily on imported lithium. Most direct imports come from Chile and Argentina, but the majority enter indirectly through electric vehicles, lithium-ion batteries, and parts like cathodes.
The S&P Global report further revealed that last year, 69% of US EV imports came from Japan, South Korea, and the EU regions still tied to China’s battery supply chain, especially for cathodes and LFP batteries.
Can Trump’s Tariff Encourage Domestic Lithium Production?
To reduce reliance on foreign sources, the US is stepping up efforts to increase domestic lithium production. On March 20, former President Donald Trump signed an executive order to accelerate mineral production by improving funding, streamlining permits, and expanding federal land access.
Additionally, the US launched a critical minerals investigation on April 15, which may result in tariffs. If enacted, these tariffs could incentivize local mining and refining of lithium and cobalt.
Global EV Sales Soar But U.S. Struggles
Electric vehicle (EV) sales posted strong gains in March and Q1 2024. Globally, passenger plug-in EV sales rose 33.5% in March and 31.1% in the first quarter compared to last year.
Once again, China dominated, while the US struggled with growing uncertainty due to trade tensions.
Battery Manufacturing and EV Growth
In the US, there’s a clear divide between support for raw material mining and EV battery manufacturing. The upstream sector, i.e., mining and refining, has gained momentum from recent policy support.
However, downstream manufacturing is under pressure. Rising costs, funding freezes, and reduced demand fueled by tariff concerns have led to project cancellations:
- T1 Energy Inc. scrapped a $2.6 billion battery plant in Georgia.
- KORE Power Inc. canceled its $1.25 billion project in Arizona.
These facilities were initially backed by former President Joe Biden’s clean energy incentives, now paused under the Trump administration. If tariffs persist, more EV battery projects may be delayed or shelved.
Automakers Shift Strategy Amid US Tariffs
As tariff impacts intensify, carmakers are shifting production strategies to avoid added costs:
- General Motors is increasing US output and cutting production in Mexico.
- Nissan has paused US orders for some Mexico-built cars and may move manufacturing entirely to the US.
- Stellantis has temporarily halted operations in both Mexico and Canada.
- Jaguar Land Rover has suspended US shipments for a month to assess tariff implications.
- Tesla is also affected, as it relies heavily on China-based suppliers for key components.
UK and EU Ease EV Targets in Response to Trade Pressure
In response to the US tariffs, the UK has aligned with the EU in relaxing short-term EV adoption targets. Automakers can now use future sales to meet current quotas. The UK’s 2025 target of 28% BEV (battery electric vehicle) sales remains unchanged, rising to 80% by 2030.
However, penalties for missing emission targets have been pushed from 2026 to 2029, and fines have been reduced from £15,000 to £12,000 per vehicle. Additionally, EU carmakers can now pool EV sales to meet joint goals, easing near-term sales pressure.
Lithium Price Forecast Beyond 2025: Rebound Expected After 2035 Supply Crunch
Between 2024 and 2026, the lithium will remain oversupplied, with 2025 marking the steepest surplus. As seen, this trend pushed prices to their lowest point in years.
S&P Global forecasts that although the market will gradually move toward balance after that, prices will stay relatively low through 2030–2034. Even as demand starts to exceed supply.
- Notably, it’s only by 2035, when a significant shortage of 406,000 tonnes is expected, that lithium prices finally begin to rebound. Study the chart below:
Overall, the global EV market remains strong, but falling lithium prices, policy shifts, and rising trade tensions are reshaping the landscape. While China strengthens its hold on battery production, the US is struggling to build a fully domestic battery supply chain. With EV demand rising and tariffs looming, the road ahead for US manufacturers will depend on how quickly they can secure local resources and revive clean energy investments.
