The United States and Japan have announced a trade deal on electric vehicle (EV) battery minerals that aims to strengthen their battery supply chains and grant Japanese automakers wider access to the new $7,500 U.S. EV tax credit.
The agreement prohibits both countries from enacting export restrictions on the minerals most critical for EV batteries, including lithium, nickel, cobalt, graphite, and manganese. It also aims to reduce U.S.-Japanese dependence on China for these materials and requires collaboration to combat “non-market policies and practices” of other countries in the sector.
This minerals-focused trade deal is one way that the Biden administration hopes to open up access for trusted allies to the EV tax credits in last year’s Inflation Reduction Act, which aims to promote the use of clean energy and reduce carbon emissions. However, half of the credit for purchasing consumers is reserved for North American-assembled vehicles and batteries, which has caused concern among the European Union, Japan, and South Korea.
The other half of the credit is contingent on at least 40% of the value of critical minerals in the battery being extracted or processed in the United States or a country with a U.S. free trade agreement or recycled in North America. The U.S. Treasury is expected to provide guidance on sourcing requirements for the EV tax subsidies by the end of the week, which will provide important information to the auto, battery, and clean energy sectors.
“Japan is one of our most valued trading partners and this agreement will enable us to deepen our existing bilateral relationship,” U.S. Trade Representative Katherine Tai said in a statement.
“This is a welcome moment as the United States continues to work with our allies and partners to strengthen supply chains for critical minerals, including through the Inflation Reduction Act.”
The two countries agreed to review the minerals agreement every two years, including whether it is appropriate to terminate or amend it.
