The United States and Japan on Tuesday announced a trade deal on electric vehicle battery minerals, which is key to strengthening their battery supply chains and giving Japanese automakers easier access to new credit. US $7,500 electric vehicle tax.
According to senior Biden administration officials, the quickly brokered deal prohibits the two countries from putting in place bilateral export restrictions on the most important minerals for electric vehicle batteries. These minerals include lithium, nickel, cobalt, graphite, and manganese.
The agreement also aims to reduce U.S.-Japan dependence on China for these materials by requiring collaboration to combat other countries’ “non-trade policies and practices” in the sector and to conduct reviews of foreign investment in their critical mineral supply chains.
Mineral-focused trade deals are a way for the Biden administration to open up trusted allies access to the $7,500-per-vehicle tax credits for electric vehicles under last year’s law on reducing climate-related inflation.
Half of this tax credit is reserved for vehicles and batteries assembled in North America, a source of considerable tension with the European Union, Japan and South Korea, which fear that their car manufacturers and their manufacturers of batteries do not become uncompetitive.
The other half of the credit is contingent on the condition that at least 40% of the value of the critical minerals contained in the battery were mined or processed in the United States or a country that has signed a free trade agreement with the United States, or recycled in North America.
The U.S. Treasury is expected to define procurement requirements for electric vehicle tax subsidies by the end of the week, providing guidance eagerly awaited by the automotive, battery and energy sectors. own.
However, when asked whether the trade deal would allow batteries, components and vehicles from Japan to benefit from this part of the tax credit, officials said that decision was up to the Treasury.
Officials said the USTR does not intend to seek congressional approval for the minerals trade deal, as it is within the agency’s authority to negotiate sector-level trade deals. of the executive.
They said, however, that the agreement’s provisions to promote labor rights and recycling in battery mineral supply chains would help both countries.
“Japan is one of our most valuable trading partners and this agreement will allow us to deepen our existing bilateral relationship,” U.S. Trade Representative Katherine Tai said in a statement.
“This is an opportune time as the United States continues to work with allies and partners to strengthen critical mineral supply chains, including through the Curbing Inflation Act ( Inflation Reduction Act).
The two countries have agreed to review the minerals agreement every two years, including to determine whether to terminate or modify it.
