Key facts
- Trump's grid security order may disrupt battery storage supply chains critical for AI and data center expansion.
- China supplied 50% of US lithium-ion battery imports by value in the 12 months to June 2026.
- US reliance on Chinese transformers (3%) and circuit breakers (<1%) is already low.
- Rulemaking by December 24, 2026, will define 'Covered Foreign Entity' ownership, potentially impacting South Korean and Mexican suppliers.
- The order cites the growth of data centers and AI as reasons for national security concerns regarding supply disruptions.
President Donald Trump's August 26, 2026, Executive Order 14421, aimed at enhancing US power grid security by restricting Chinese-made equipment, is poised to disproportionately affect battery storage supply chains, according to Rystad Energy. While the order targets transformers, inverters, battery energy storage systems, circuit breakers, and turbines, analysis suggests that US reliance on Chinese suppliers for transformers and inverters has already diminished significantly.
However, the battery storage sector presents a more vulnerable scenario. In the 12 months leading up to June 2026, China accounted for 50% of US lithium-ion battery imports by value. Rystad Energy highlights that no other origin country can currently match this scale, posing a risk to the expansion of data centers and artificial intelligence infrastructure, which the order itself acknowledges as critical national security interests.
For transformers and high-voltage circuit breakers, the market has already shifted away from Chinese imports. In the 12 months to June 2026, China supplied only 3% of US transformer imports and less than 1% of breaker imports. South Korea, Mexico, and Canada collectively represent a significant portion of these imports. Hyosung Heavy Industries' recent $285.3 billion in ultra-high-voltage transformer contracts with US hyperscalers underscores the trend of suppliers leveraging US manufacturing capabilities.
Similarly, the inverter market has seen a retreat from Chinese supply, with reported export values to the US falling 34% between 2022 and 2025, partly due to US manufacturing incentives. US inverter capacity is projected to reach 126 gigawatts by 2028.
The most critical aspect of the order hinges on the rulemaking due by December 24, 2026. This includes how broadly the definition of 'Covered Foreign Entity' ownership will be interpreted. If the definition extends to suppliers in countries like South Korea or Mexico that use Chinese-controlled components or capital, it could ensnare current alternative solutions and leave the US facing shortages across multiple equipment categories simultaneously. Procurement teams for hyperscalers are advised to model this potential outcome.