Nomura: China Energy Storage Systems - USMCA's Potential Impact on ESS
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Nomura analyzed the potential impact of the upcoming USMCA joint review on July 1, 2026, on the Mexico supply chains of Chinese energy storage system companies. The report highlights growing risks for the current arbitrage model, where Chinese firms assemble battery systems in Mexico to access preferential tariffs. The United States is expected to push for four tightening measures: restricting companies with over 25% Chinese ownership, raising the regional value content threshold above 75%, designating battery cells as core components subject to independent content rules, and introducing a CFIUS-style investment screening mechanism.
The analysis models three potential review outcomes: a 16-year extension without renegotiation, a modified extension with stricter rules of origin and equity limits, and an annual review mode. Nomura identifies the independent regional value content test for battery cells as the most structurally disruptive measure, as it would sever Mexico's role as a re-export hub for Chinese battery technology.
If the content threshold is raised to 75%, non-cell North American components currently account for roughly 48% of system costs. Meeting the higher threshold would require local cell sourcing, a constraint likely to persist until new North American capacity comes online. LG Energy Solution (373220 KS, Buy) represents a potential supply source, with its new lithium iron phosphate facility expected to reach mass production between 2027 and 2028.