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(Bloomberg) -- The US Commerce Department set the stage for anti-subsidy duties on imports of key battery components from China, after concluding materials had been unfairly subsidized.

The agency’s preliminary determination is an early milestone in a trade case looking at supplies of active anode material, which is vital for electric vehicle batteries, and includes materials such as graphite and silicon.

US graphite producers were among the petitioners that asked for investigations into whether China’s massive state subsidies are artificially lowering prices and making it harder for them to compete. A sharp tariff increase would raise the cost of US-made EVs at a time when a Republican tax plan would eliminate consumer credits on the vehicles.

The preliminary duties announced Tuesday by the Commerce Department are meant to counter subsidization of the material, though a separate probe of alleged unfair pricing is also underway. Final decisions are expected later this year in the trade cases, which are separate from President Donald Trump’s widespread tariffs on all trading partners as well as planned levies on semiconductors, pharmaceuticals and other goods.

The Commerce Department found that Chinese producers and exporters are benefiting from subsidies worth as much as 721%. Those companies include Huzhou Kaijin New Energy Technology Corp. and Panasonic Global Procurement China Co. Both firms didn’t immediately respond to requests for comment.

China produces most of the world’s graphite, and US battery makers rely on the country for the material. Around 56% of the US’s energy transition-related graphite demand was met by Chinese imports in 2024, according to analysis by BloombergNEF.

--With assistance from Jennifer A. Dlouhy and Ocean Hou.

(updated with more details in the final two paragraphs)