While recent growth in these two markets has been strong, the EU 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 US, industry stakeholders are seeking clarity on how the tariff war will impact Li-ion battery recycling market growth in the US.
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 the US battery recycling and manufacturing market, and provides a quantitative analysis on the likelihood of EU LIB recyclers and automotive OEMs reaching minimum recycled contents targets as mandated by the EU Battery Regulation. If players can navigate the evolving landscape and look to match the growing availability of manufacturing scrap and end-of-life (EOL) electric vehicle (EV) batteries with increased recycling capacity, this could see the global Li-ion recycling market be valued at US$52B in 2045.
While recent LIB recycling market growth in the US and the Asia-Pacific has been rapid in the last few years, much of the growth seen in the EU has only seen a focus on establishing mechanical battery recycling capacity to produce black mass. This is an intermediary product, which 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 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 contents targets in new EV batteries, as mandated in the EU Battery Regulation.
These targets for lithium, nickel, and cobalt content are set for mid-2031, and set to increase by mid-2036. IDTechEx’s research from their “Li-ion Battery Recycling Market 2025-2045: Markets, Forecasts, Technologies, and Players” report analyses several key scenarios which 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% collection rate of European cell manufacturing scrap and European car BEV LIBs (excluding LFP) are taken, it will be possible for all EU Battery Regulation minimum contents targets to be met for new EV car batteries. However, meeting the mid-2036 lithium target will be tight (12.2% > 12%). 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 are also met.
While LIB recycling growth in the EU will need to ramp up, LIB industry stakeholders in the US are seeking clarity on recent tariff implementation, funding freezes, and the impacts these will have on LIB manufacturers and recyclers. The Trump Administration pausing the Biden Administration’s Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law funding will create challenges and could hinder growth for US EV and battery energy storage system (BESS) battery markets, even if this is due 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 cells for EV and BESS technologies in the US.
Many critical minerals for batteries are generally exempt from reciprocal tariffs enacted by the Trump Administration, given the heavy reliance of the US on foreign imports. For example, the US 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. The US is supplied with part of its cobalt from Canada. This supply, however, alongside Canadian-sourced lithium and nickel are subject to a 10% tariff (depending on USMCA compliance).
These trends could suggest that the Trump Administration is promoting domestic manufacturing of key green energy technologies, particularly since critical minerals are broadly exempt from reciprocal tariffs. This could benefit US LIB recyclers, as they will not be impacted by tariffs and LIB manufacturers will be searching for new domestic material suppliers, irrespective of whether these materials are of virgin or recycled nature. However, limits on LIB manufacturing capacity in the US, and/or reduced imports of more expensive cells could potentially 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 US LIB recycling market.
On April 15 2025, 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 US, since their recycled material supply could be cheaper than imported materials with tariffs. If production credits from the IRA remain, then the financial benefit for sourcing domestically produced recycled materials for new battery production could be even greater for US LIB manufacturers, improving outlook again for recyclers. Ultimately, it is currently uncertain how tariff implementation and legislation changes may proceed or change, and therefore both the positive and negative impacts on US LIB manufacturers and recyclers proposed are speculatory. US recyclers could benefit in the short-term from reciprocal tariffs being implemented by the Trump Administration. The potential impact of introducing tariffs on critical minerals could also benefit recyclers, and if production credits from the IRA remain, LIB manufacturers would benefit from sourcing materials domestically, creating 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, then this could result in domestic production of BESS and EV technologies to slow. This could reduce the much longer-term EOL battery availability for recyclers in the US.
