How tariffs, regulations affect LIBs recycling in US, EU

Lithium-ion battery (LIB) recyclers have continued to gather new funding, form strategic partnerships and commission large-scale facilities over the last few years. This has signified a hyperactive market, especially with players in the Asia-Pacific and the U.S. making strides toward commercializing their technologies and scaling their recycling capacities, securing recycled material offtake agreements and expanding overseas.

While recent growth in these two markets has been strong, the European Union has not yet matched the pace of establishing major commercial-scale hydrometallurgical or refining capacity to produce battery-grade metals salts from LIB recycling. Meanwhile, in the U.S., industry stakeholders are seeking clarity on how the trade war will affect the growth of the LIB recycling market.

This article draws insights from IDTechEx’s market research report “Li-ion Battery Recycling Market 2025-2045: Markets, Forecasts, Technologies and Players," examining the impact that tariffs and legislation changes could have on U.S. battery recycling and manufacturing, and provides a quantitative analysis on the likelihood of EU LIB recyclers and automotive original equipment manufacturers (OEMs) reaching minimum recycled contents targets as mandated by the EU Battery Regulation.

If players can navigate the evolving landscape and match the growing availability of manufacturing scrap and end-of-life (EOL) electric vehicle (EV) batteries with increased recycling capacity, the global Li-ion recycling market could be valued at $52 billion in 2045.

Will EU LIB recyclers and automotive OEMs reach EU Battery Regulation targets?

While recent LIB recycling market growth in the U.S. and Asia-Pacific has been rapid in the last few years, much of the growth seen in the EU has been focused on establishing mechanical battery recycling capacity to produce black mass. This is an intermediary product that requires further refinement via hydrometallurgical processes to produce battery-grade metal salts.

These salts can be reintroduced into new battery manufacturing. It will be crucial for players to start developing commercial-scale hydrometallurgical refining capacity to prevent these critical materials from leaving the EU and being processed in Asia.

Fortum is one, if not the only, key player to establish commercial-scale hydrometallurgical LIB recycling capacity in the EU. Moreover, establishing this capacity will be needed for EU automotive OEMs to reach minimum recycled-content targets in new EV batteries, as mandated in the EU Battery Regulation.

The targets for lithium, nickel and cobalt content are set for mid-2031 and will increase by mid-2036. IDTechEx’s research from its “Li-ion Battery Recycling Market 2025-2045: Markets, Forecasts, Technologies and Players” report analyzes several key scenarios that investigate the likelihood of EU LIB recyclers and automotive OEMs reaching these targets, depending on types of recycling feedstock used and their collection rates.

In a scenario where a 75 percent collection rate of European cell manufacturing scrap and European car BEV LIBs (excluding LFP, or lithium iron phosphate) are taken, it would be possible for all EU Battery Regulation minimum content targets to be met for new EV car batteries.

However, meeting the mid-2036 lithium target will be tight (12.2 percent > 12 percent). This emphasizes the importance of maximizing EV battery collection rates in the EU, which will rely on automotive OEMs, recyclers and collection logistics companies working in tandem to achieve this result, or better.

This analysis assumes that some EV batteries in Europe are not recycled and first go to second-life applications and that material recovery efficiency targets set out by the EU Battery Regulation also are met.

Chart courtesy of IDTechEx

The Trump administration tariffs, federal funding freezes, impact on LIB cell costs and manufacturing and critical mineral exemptions

While LIB recycling growth in the EU will need to ramp up, LIB industry stakeholders in the U.S. are seeking clarity on recent tariff implementation and funding freezes and their impacts on LIB manufacturers and recyclers.

The Trump administration's pause on the Biden administration’s Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law funding will create challenges and could hinder growth for U.S. EV and battery energy storage system (BESS) markets, even if related to temporary uncertainty.

A back-and-forth exchange between the Trump administration and federal judges blocking funding freezes has contributed to this uncertainty.

As suggested in IDTechEx’s “Batteries for Stationary Energy Storage 2025-2035: Markets, Forecasts, Players and Technologies” market report, LFP adoption for BESS currently dominates globally given manufacturers’ prioritization on lower technology cost, longer cycle life and improved safety. Increasing tariffs through 2025 and 2026 on Chinese LFP cells could see domestically produced LFP cells become more cost-competitive if production credits from the IRA remain in place.

However, given the great majority of LFP cell production currently resides in China, this benefit will seldom be realized in the medium term. Otherwise, purchasing Chinese LFP cells with added tariffs could still be the cheaper alternative than domestically producing them, but at a higher cost than in the last few years. This cost would likely be passed onto the customer, and/or this may see an increased shift back to using (domestically manufactured) NMC (nickel manganese cobalt) cells for EV and BESS technologies in the U.S.

Many critical minerals for batteries generally are exempt from reciprocal tariffs enacted by the Trump administration, given the heavy reliance of the U.S. on foreign import

. For example, the U.S. is heavily reliant on China for its graphite and manganese sulfate, which are materials used in LIB manufacturing. Broad critical mineral tariff exemptions include copper, cobalt, lithium, manganese, natural graphite and silicon. Canada provides some cobalt to the U.S. This supply, however, alongside Canadian-sourced lithium and nickel are subject to a 10 percent tariff (depending on USMCA compliance).

How tariffs and changing legislation could drive and hinder U.S. LIB recycling market growth

These trends could suggest that the Trump administration is promoting domestic manufacturing of key green energy technologies, particularly since critical minerals broadly are exempt from reciprocal tariffs. This could benefit U.S. LIB recyclers as they will not be affected by tariffs, and LIB manufacturers will be searching for new domestic material suppliers, irrespective of whether these materials are virgin or recycled.

However, limits on LIB manufacturing capacity in the U.S., and/or reduced imports of more expensive cells potentially could slow down BESS and EV production and deployment. This could then reduce the availability of end-of-life (EOL) batteries for recycling in 15+ years’ time, i.e., causing a much longer-term effect on the U.S. LIB recycling market.

On April 15, Trump signed an executive order for an investigation on critical minerals and derivative products, under Section 232 of the Trade Expansion Act, partly to assess vulnerabilities in supply chains and to reduce dependence on foreign suppliers.

While not currently in place in most cases, tariffs on some critical minerals, and potentially intermediary (derivative) products, could be possible after the investigation. This could benefit LIB recyclers in the U.S., since their recycled material supply could be cheaper than imported materials with tariffs. 

US LIB recycling and manufacturing outlook

Ultimately, it is uncertain how tariff implementation and legislation changes could proceed or change, therefore both the positive and negative impacts on U.S.

LIB manufacturers and recyclers proposed are speculatory. U.S. recyclers could benefit in the short term from reciprocal tariffs the Trump administration is implementing. The potential impact of introducing tariffs on critical minerals also could benefit recyclers, further advantages for US LIB recyclers.

However, if tariffs create more uncertainty and difficulty for domestic battery production, if volumes of imported Chinese LFP cells reduce or their implementation continues at higher costs, domestic production of BESS and EV technologies could slow, reducing the much longer-term EOL battery availability for recyclers in the U.S..

For more detailed information on Li-ion battery recycling policies and regulations and further global LIB recycling market analysis, including key technologies, player activity (LIB recycling facilities, partnerships, supply agreements, funding, mergers and acquisitions, joint ventures, etc.), business models, economics, value chains, & 20-year recycling forecasts for Li-ion batteries from electric vehicles, manufacturing scrap, energy storage systems, & consumer electronics, please refer to IDTechEx’s new market report “Li-ion Battery Recycling Market 2025-2045: Markets, Forecasts, Technologies and Players”.

For more information on IDTechEx reports, including downloadable sample pages, or for the full portfolio of battery-related research available from IDTechEx, see www.IDTechEx.com/Research/ES.

IDTechEx provides trusted independent research on emerging technologies and their markets. Since 1999, it has helped clients to understand new technologies, supply chains, market requirements, opportunities and forecasts. For more information, contact research@IDTechEx.com or visit www.idtechex.com.