Rystad Energy's latest research finds that the executive order targeting Chinese-manufactured components in the US power grid stands to create greater disruption in battery storage procurement than among the transformers and switchgear the policy was originally intended to address.
Executive Order 14421, covering five categories of power-infrastructure hardware — substation transformers, grid-connected inverters, battery energy storage systems, high-voltage circuit breakers, and generation turbines — took effect after Trump signed it on 26 August 2026. According to Rystad Energy's analysis, transformer and inverter procurement from China has dropped noticeably, leaving the US with limited vulnerability in those two equipment categories.
Lithium-ion battery storage presents a different picture on supply concentration: over the 12 months through June 2026, China accounted for half of all such imports into the United States by value, a share that no other sourcing country approaches. The executive order centres its national security rationale on the proliferation of data centres and artificial intelligence infrastructure, while an industry observer noted that battery storage bears the heaviest practical burden from the supply chain constraints that framework produces.
Prior to the directive taking effect, the domestic market for transformers and breakers had already shifted away from Chinese imports, leaving both product lines with relatively limited exposure to the new tariffs. Geoffery Hebertson, a renewables and power analyst, noted that battery storage technology has yet to reach that point, and that no alternative supply source exists with the capacity to replace a 50% Chinese share at the volumes now demanded by data centres and AI infrastructure.
Delivery of transformers and high-voltage circuit breakers comes at a point when the bulk of market movement has already run its course. Over the 12-month period ending June 2026, transformer purchases from China represented roughly 3% of total US import value, while circuit breakers sourced from there accounted for less than 1%. Three nations — South Korea, Mexico, and Canada — together make up nearly three-quarters of breaker imports and roughly half of all transformer shipments.
On 15 September, Hyosung Heavy Industries announced ultra-high-voltage transformer agreements worth $285.3 billion with two US hyperscalers, with the deals pointing to the role that locally based manufacturing capacity in the United States has played in positioning the South Korean supplier to secure that business.
Procurement of inverters had been shifting away from Chinese sources before the broader trend took hold. Inverter assembly drawn onshore by the US Section 45X advanced manufacturing production credit coincided with a 34% contraction in China's reported export value to the American market between 2022 and 2025. Forecasts point to inverter installations across the country hitting a combined 126 gigawatts of output capacity before 2028 draws to a close.
Battery energy storage systems fall within the order's scope, with uninterruptible power supply units tied to essential infrastructure explicitly named — a provision that pulls in the behind-the-meter storage installations that data centres rely on to maintain power continuity. Ranked second among US lithium-ion battery import sources, South Korea accounts for roughly 15% of that trade, with Japan close behind at 13% — yet neither country, nor any other supplier, holds enough production capacity to take on the volume that a shift away from Chinese goods would require.
One unresolved matter centres on how expansively the rulemaking will draw the boundaries of Covered Foreign Entity ownership. Where the Secretary of Energy draws the boundary around that definition matters considerably — should the ruling extend to suppliers assembling goods in South Korea or Mexico when Chinese-controlled components or investment are involved, sources currently treated by the market as compliant alternatives would fall within scope, potentially leaving the country facing shortfalls across several equipment categories at the same time, with the December rulemaking described by one observer as the order's most consequential juncture.
Hardware networks that AI infrastructure expansion currently relies on may fall under the same regulatory framework if ownership definitions reach back far enough to trace investment through assembly facilities in South Korea or Mexico. Geoffrey Hebertson, a renewables and power analyst, noted that procurement teams at large cloud operators would do well to stress-test the numbers against that reading, adding that while the contractual language plausibly supports such an interpretation, it falls short of certainty.
