Semiconductors have in recent years become a focal point in the U.S.’s efforts to impede China’s technological advancement. Now Washington has its eye on yet another red-hot tech sector where China is making great strides: batteries for electric vehicles.

Earlier this month, the Departments of Treasury and Energy proposed rules that would limit electric vehicle buyers from claiming tax credits if their cars contain battery materials from China and other countries considered “hostile” to the U.S. Under President Joe Biden’s signature climate law approved last year, consumers are entitled to up to $7,500 in subsidies for purchases of EVs made in the U.S. using largely domestic materials.

In response, China’s Ministry of Commerce fired back last week, saying the U.S. rules “discriminate against Chinese companies and violate WTO rules.” The exclusion of Chinese suppliers from U.S. tax benefits is a “typical non-market-oriented policy and practice,” the ministry said.The rules, which aim to reduce the U.S.’s dependence on China’s supply chains in a new era of decoupling, would likely hinder Biden’s efforts to drive EV sales as part of the president’s plan to cut planet-warming greenhouse gas emissions in half by 2030.

Also at stake is the U.S.’s aim to curb China’s dominance in a fast-growing sector spurred by countries’ transition toward electric vehicles. CATL and BYD, two of China’s largest battery makers, together accounted for about 53% of the world’s EV battery usage for the first 10 months of this year, according to data from SNE Research.

As of Q3 this year, China is the world’s largest EV market with a 58% share, followed by the U.S. and Germany, according to research firm Counterpoint.South Korean giants like LG, Samsung and SK On provide competitive alternatives to China’s cheap and advanced batteries and are most likely to benefit from souring U.S.-China relationships. But even the Korean firms are reeling from the new geopolitical complications.

Despite the fact that SK On has been tapped by both Ford and Hyundai to set up battery plants in the U.S., its parent SK Group’s president Chey Tae-won recently blamed the U.S. for keeping battery costs high. The battery arm of the Korean chaebol is now forced to look elsewhere for non-Chinese materials. China owns much of the global supply chain for EV batteries, from mining rare minerals, refining to cell production.

To maintain their cost appeal, Chinese battery firms have been clamoring to set up factories in America that will continue to qualify their buyers for the EV tax credit. Industry giants like Gotion, BYD and CATL have made strategic plans to manufacture in the U.S., though their journey is not without obstacles. Ford, for example, has temporarily paused its plans to build a $3.5 billion EV battery factory with CATL in Michigan as U.S. politicians scrutinize its deal with the Chinese firm.