Executive Order 14421, signed by Donald Trump on August 26, 2026, is designed to secure the U.S. power grid from Chinese-made equipment. However, new analyses indicate that this action is likely to harm the storage battery supply chain more than the transformers and switchgear that are the main targets of this order.
Impact on the Battery Supply Chain
According to Rystad Energy analyses, the U.S. reliance on Chinese transformers and inverters has significantly decreased, and thus, the practical contact level in these categories is limited. However, in the case of storage batteries, there is a more vulnerable picture. China accounted for 50 percent of U.S. lithium-ion battery imports by value in the 12 months ending June 2026, and no alternative source has been able to compete at this scale.
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National Security Implications
Executive Order 14421 clearly cites the growth of data centers and artificial intelligence as a reason that disruptions in the supply chain currently have national security implications. This order addresses the supply chain of energy storage batteries, which support critical infrastructure through uninterrupted power supply systems, thereby extending its scope to the battery systems that data centers use for power stability.
The current demand for lithium-ion batteries is such that no other country can compensate for China's 50 percent share in this market. South Korea ranks next with 15 percent, and Japan with 13 percent of U.S. lithium-ion battery imports.
Challenges Facing the Supply Chain
A fundamental question is how the regulation dated December 24, 2026, defines the ownership of covered foreign entities. If the Secretary of Energy defines this in a way that includes suppliers in South Korea or Mexico that use components or capital controlled by China, then the price sources currently considered as solutions in the market will themselves be covered, and the U.S. will face shortages in several categories of equipment.
This December 2026 regulation is the most critical moment of this order. If ownership is broad enough to link Chinese investment to assembly plants in South Korea or Mexico, the supply chain that the technology industry relies on to maintain the construction of AI infrastructure will itself become a problem. This outcome is not certain, but it is a reasonable interpretation of the text, and supply teams in large companies should now model it.
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