By Chris Isidore, CNN

(CNN) — The Trump administration is imposing a substantial tariff on a raw material that is critical for electric vehicle batteries, which could significantly raise the cost of building EVs in the United States.

The Commerce Department announced a 93.5% tariff on Chinese graphite Thursday, accusing the country of “dumping” the raw material in the United States below the market price. The decision was hailed by domestic graphite producers, who say Chinese producers dominate the market and keep American companies from getting off the ground.

Raw graphite is relatively cheap, costing less than $2 per pound. Chinese imports to the United States more than doubled over two years, hitting $347 million in 2023, according to the most recent Commerce Department data available. But domestic producers haven’t been making graphite of the purity needed to build EV batteries, according to testimony from Tesla during the investigation into the tariffs.

Mike O’Kronley, CEO of US-based graphite producer Novonix, said the tariff will help to increase investment and production in the domestic industry.

“This is going to be very transformative for the graphite industry in the United States,” he told CNN Friday. “Manufacturers in China have really overinvested, and they have a lot of additional capacity, so they are exporting a lot of that volume. It’s hampering the development of the US critical minerals.”

The move not only is an escalation of trade tensions between the United States and China, but another blow to American EV production.

The Trump administration is slashing federal support for electric vehicles. The administration is looking to eliminate or recall federal government loans used to help fund construction of EV factories and battery plants, and the spending and tax bill passed earlier this month that Trump signed into law will eliminate a $7,500 tax credit for EV buyers.

The Biden administration imposed a 25% tariff on graphite last year and started the process that led to the 93.5% tariff announced Thursday. On top of the other duties the Trump administration has imposed on China, Chinese graphite could face tariffs of about 160%.

However, the US industry does not currently produce enough graphite to fill demand. Until it does, American EV battery makers will just have to pay a higher price for the graphite it needs from China.

Numerous auto and EV battery makers did not respond to CNN’s request for comment. But during the hearing process on the potential tariff increase, attorneys for the automakers argued that US producers do not make the high-quality graphite needed for EV batteries.

“Lithium-ion battery producers demand (graphite) with a 99.9 percent carbon purity level, meaning extremely low metallic impurities,” said Matt Nicely, an attorney for Tesla at a hearing in early January. “Not a single US producer is able to produce (graphite) to these exacting specifications. (Domestic producers) cannot blame imports ….when they are not yet able to produce the product the market demands.”

Even O’Kronley admits it will take time for the domestic market to catch up.

“This material takes a long time to develop and qualify to be used in batteries. So it’s not very easy to switch or change supply,” he said. “Tariffs will not have an immediate effect with changing supply. But we will see changes over time and the development of a US industry is going happen now, or it’s going to be accelerated.”

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