Technological risks in the lithium supply chain have garnered significant global attention. Yet limited research explores their impact on trade stability or how technological progress mitigates diffusion. This study analyzes the interplay of technological and trade risks—where risks such as technological disruptions and technical barriers to trade destabilize trade flows and amplify supply chain vulnerabilities—within the lithium supply chain, incorporating technology dependency and supply chain management theories. Findings reveal that the U.S. holds 56–79% of core technologies across stages, while China accounts for 6–25%. This monopoly fosters potential risks such as technological barriers and embargoes, leading to large-scale trade risk diffusion characterized by branching and interactive infection patterns. Global losses could reach $90.0 billion, while China may reduce downstream losses by $5.2 billion through tech advantages. This research reveals transmission mechanisms and simulates risk diffusion, offering new insights into supply chain sustainability.