President Trump has already issued a barrage of energy and environmental-related executive orders and actions to implement his energy and environmental agenda and signal the direction of his administration. For many energy-related developers, manufacturers, and stakeholders, the executive orders and actions signalled many positive actions and changes for their respective industries but also uncertainty regarding implementation, scope, and legality.
The same is true for the battery supply chain, which spans the upstream extraction of critical minerals, midstream processing and refining, downstream battery manufacturing, and the ultimate sale of electric vehicles (“EVs”). While President Trump has issued directives to streamline the domestic production of critical minerals through two executive orders issued on January 20, 2025, “Unleashing American Energy” (“Energy Order”) and “Declaring a National Energy Emergency” (“National Emergency Order”), he has also taken actions that will negatively impact EVs and EV infrastructure. In addition, on February 1, 2025, President Trump issued three executive orders to impose new tariffs on imports from Canada, Mexico, and the People’s Republic of China (“China”) (“Tariff Orders”) that may also impact the battery supply chain. This negative change in policy direction for EVs and EV infrastructure – and, by association, others in the battery value chain such as battery manufacturers – coupled with the positive change for the domestic critical minerals sector shows a dichotomy in policies not seen in the Biden administration.
This client alert explores this dichotomy, along with President Trump’s executive orders and actions and the potential positive and negative implications they may have on the global battery supply chain.
Revoking EV Mandate and Policy to Withdraw State Emission Waivers and Subsidies
Section 2 of the Energy Order states that “it is the policy of the United States” to eliminate the “electric vehicle mandate.” Although there is no federally enforceable EV mandate, the Biden administration issued a non-binding executive order in 2021 that stipulates that EVs shall make up 50% of new cars by 2030. The target was never enforceable, but instead served as a catalyst for numerous regulations and policies that would and did stimulate the EV market.
The Energy Order states that it is the “policy of the United States” to terminate state emissions waivers that function to limit sales of gasoline-powered automobiles, which is a reference to California’s unique waiver authority under the Clean Air Act (“CAA”) for which 12 other states are signed on to follow. The Energy Order also states it is the “policy of the United States” to eliminate “unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies and effectively mandate their purchase.” To implement these EV policies, the Trump administration will likely take actions to revise, among other things, emission standards set by the Environmental Protection Agency (“EPA”) and fuel economy requirements from the National Highway Traffic Safety Administration. EPA Administrator Lee Zeldin already announced plans to submit California’s CAA waiver to Congress for review for potential revocation.
Elimination of the EV mandate and setting a policy to eliminate state emission waivers and EV subsidies sends a strong signal regarding the direction of EV policy in the U.S. under the current Trump administration. This signal is very salient to investors and developers of battery value chain projects.
Uncertainty Regarding IRA and IIJA Funding
The Inflation Reduction Act of 2022 (“IRA”) expanded credits for EVs, as well as for critical minerals for EV components, under the New Clean Vehicle Credit under Section 30D of the Internal Revenue Code (which provides a tax credit of up to $7,500 for the purchase of a new, qualified plug-in electric vehicle that meets certain critical minerals and/or battery components requirements) and the Advanced Manufacturing Credit under Section 45X of the Internal Revenue Code (which provides a credit for the U.S. production and sale of certain eligible components including qualifying battery components and applicable critical minerals). Additionally, the IRA appropriated approximately $11.7 billion to the U.S. Department of Energy’s (“DOE”) Loan Program Office, which included $3 billion for the costs of direct loans under the Advanced Technology Vehicles Manufacturing (“ATVM”) program. The ATVM program provides loans to support U.S. manufacturing of advanced technology vehicles, qualifying components, and materials that improve fuel economy. And the Infrastructure Investment and Jobs Act of 2021 (“IIJA”) created and provided funding for programs that directly benefit EV infrastructure – particularly $5 billion to the Department of Transportation (“DOT”) for the National Electric Vehicle Infrastructure (“NEVI”) Formula Program and $2.5 billion to the DOT for the Charging and Fueling Infrastructure Discretionary Grant Program.
Section 7 of the Energy Order orders an immediate pause on federal agency disbursement of funds appropriated through both the IRA and the IIJA. Section 7 requires all federal agencies to review IRA and IIJA processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of appropriated funds for consistency with the Trump administration’s policies and submit a report with the findings and recommendations of same within 90 days of the Energy Order (i.e., April 20, 2025). Until the Director of the Office of Management and Budget (“OMB”) and Assistant to the President for Economic Policy have deemed the disbursements “consistent with any review recommendations they have chosen to adopt,” no funds appropriated under the IRA or IIJA may be disbursed. The following day, the OMB issued a “Memorandum to the Heads of Departments and Agencies,” stating that the pause only applies to “funds supporting programs, projects, or activities that may be implicated by the policy established in Section 2 of the [Energy Order].” However, Section 2 of the Energy Order does not discretely list portions of the IRA or the IIJA for which money should be paused.
Importantly, the bulk of the IRA’s incentives for clean energy and EVs derives from tax credits that can only be revoked by an act of Congress. And the Energy Order does not include any mention of either EV-related IRA tax credit mentioned above or any tax credits as it relates to the IRA altogether. As such, the Energy Order does not impact EV-related tax credits or any renewable energy tax credits more broadly.
The pause on IRA and IIJA funds disbursements discussed above from Section 7 of the Energy Order may have a particular impact on the battery supply chain, particularly related to EVs, but the legality of same is unclear. Section 7 of the Energy Order particularly calls for the pausing of unspent government funds for both DOT EV-related programs funded through the IIJA mentioned above. The Energy Order also has the effect of pausing the ATVM program mentioned above. Federal agencies have already started to implement Section 7 of the Energy Order. For example, the Federal Highway Administration, an agency of the DOT, issued a letter directing states to stop spending money on EV charging infrastructure that was allocated under the Biden administration while the new administration reviews the policies underlying implementation of the NEVI Formula Program. States with NEVI-funded projects up and running have mostly been reimbursed by the federal government. However, for states with projects in the works or those currently contracting for them, this letter and the corresponding uncertainty may bring the projects to a standstill with no indication of if or when they will be able to proceed and request reimbursement.
It is expected that the funding pause may lead to state and project-level legal disputes and challenges to its constitutional authority. Such legal challenges may arise under laws like the Impoundment Control Act of 1974, 2. U.S.C. 681 et al., which prevents the President from unilaterally withholding (or impounding) funds already appropriated by Congress without Congressional approval and sets forth the required procedures for same. Additionally, prior to January 20, 2025, the Biden administration’s position was that the vast majority of grants for clean energy programs appropriated under the IRA and the IIJA had already been “obligated” (meaning contracts have been signed between U.S. federal agencies and recipients) and were likely protected from being paused, clawed back, or otherwise halted by the Energy Order. However, states, project proponents, and other stakeholders brace themselves as federal agencies take actions to implement the pause on IRA and IIJA funds disbursements under the Energy Order.
Prioritizing Domestic Mining and Processing (Manufacturing) of Critical Minerals at the Exclusion of Foreign Adversaries
President Trump included various directives and actions within the executive orders to promote the mining and processing of critical minerals domestically. The Energy Order and National Emergency Order expand upon the first Trump administration’s “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals” executive order (“Critical Mineral Supplies Order”) and “Addressing the Threat to the Domestic Supply Chain From Reliance on Critical Minerals From Foreign Adversaries and Supporting the Domestic Mining and Processing Industries” executive order (“Supply Chain Threat Order”), as well as the Biden administration’s “America’s Supply Chains” executive order (“Supply Chains Order”) (collectively, the “Pre-2025 Critical Minerals Orders”).
The Energy Order
Sections 3 and 9 of the Energy Order direct the heads of all federal agencies to take steps to revise or rescind all agency actions that impose undue burdens on the domestic mining and processing of non-fuel minerals. Further, Section 9 of the Energy Order focuses solely on restoring mineral dominance in the U.S. by directing specific federal agencies to support domestic critical minerals projects by, among other things: (1) streamlining the permitting process; (2) encouraging critical mineral exploration through accelerating geological mapping and public lands assessments; (3) ensuring a robust critical mineral supply; and (4) providing policy recommendations to “boost competition” with mineral-wealthy nations. Department of Interior Secretary Doug Burgum issued Secretarial Order 3418 to implement the Energy Order.
For more information on the Energy Order, read our article here.
The National Emergency Order
Section 2 of the National Emergency Order directs the heads of all federal agencies to identify and exercise any available emergency authorities to identify, lease, site, produce, transport, refine, and generate (including on federal lands) domestic “energy” or “energy resources” – which Section 8(a) of the National Emergency Order interchangeably defines as limited to “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606(a)(3)” only. (emphasis added) Section 3 of the National Emergency Order directs the heads of all federal agencies to do the same to expedite all infrastructure, energy, environmental, and natural resources projects and facilitate the supply, refining, and transportation of energy throughout the West Coast, the Northeast, and Alaska. Department of Interior Secretary Burgum issued Secretarial Order 3417 to implement the National Emergency Order.
The Pre-2025 Critical Minerals Orders
On December 20, 2017, President Trump signed the Critical Mineral Supplies Order requiring the Secretary of the Interior to identify and publish a list of critical materials. Pursuant to the Critical Mineral Supplies Order, the Secretary of the Interior published said list and found that the U.S. imports 31 of the 35 critical minerals included on the list. On September 30, 2020, President Trump signed the Supply Chain Threat Order, which focuses on the concern of the U.S.’s reliance on foreign adversaries for critical minerals. According to the Supply Chain Threat Order, the U.S. was importing 80% of its rare earth elements directly from China. The critical minerals specifically mentioned in the Supply Chain Threat Order that are primarily import-dependent are barite, gallium, and graphite. On February 24, 2021, President Biden did not rescind these two executive orders issued by the previous administration but rather expanded on them to direct the Secretary of Defense to identify risks in the supply chain for critical minerals and policy recommendations to mitigate those risks. The Pre-2025 Critical Minerals Orders have not been rescinded and are therefore still valid under the current Trump administration.
Summarily, while the above executive orders crack down on EVs, the Trump administration is showing strong support for the critical minerals sector in the U.S. Clearly hoping to make the U.S. a hub for critical minerals without its prior reliance on international imports, President Trump is showing a strong interest in making the U.S. a mineral-wealthy nation and creating ideal market conditions for critical minerals projects.
Tariffs on Canada, Mexico, and China
The Tariff Orders imposed a 25% tariff on goods imported from Canada and Mexico as well as a 10% tariff on imports from China effective February 4, 2025, which will likely affect the battery supply chain. Days after the issuance of the Tariff Orders, Canada promised to retaliate with a matching 25% tariff on U.S. imports, including EVs from the U.S., and Mexico promised to impose retaliatory tariffs without mentioning any details. On February 3, 2025, President Trump agreed to suspend the tariffs against Mexico and Canada by one month (i.e., until March 6, 2025) after negotiations with his counterparts in each nation. Canada and Mexico supply a large percentage of the steel used in the U.S. Canada accounts for approximately half of the refined nickel, which is an essential component for batteries, consumed in the U.S. The EV production in Mexico has been rising over recent years as well.
The Chinese tariffs went into effect at 12:01 am ET on February 4, 2025. On the same day, China retaliated with two tariffs on imports from the U.S. with an effective date of February 10, 2025: (1) a 15% tariff on coal and liquefied natural gas; and (2) a 10% tariff on crude oil, farm equipment, and some automobiles. Also on the same day, China restricted exports of tungsten, tellurium, molybdenum, bismuth, and indium.
We are continuing to track the developments of the Tariff Orders to further identify what the implications of these will be on the battery supply chain moving forward.
For further information, please contact:
Michael Rodgers, Partner, Linklaters
michael.rodgers@linklaters.com
