The United States and Japan have reached an agreement on minerals for electric vehicle batteries.
According to foreign media reports, on March 28th, the United States and Japan announced a trade agreement on minerals for electric vehicle batteries. The agreement is said to be a key step for the two countries to strengthen their battery supply chains.
Senior US government officials stated that the two sides quickly negotiated and reached an agreement that prohibits bilateral export restrictions on crucial minerals for electric vehicle batteries, such as lithium, nickel, cobalt, graphite, and manganese. In addition, the agreement aims to collaborate in combating "non-market policies and practices" of other countries in this field, as well as conducting investment reviews on foreign investments in the critical mineral supply chain to reduce the US and Japan's reliance on China in the aforementioned materials. The US and Japan have also agreed to review the mineral agreement every two years, including whether the agreement needs to be terminated or modified.
The Biden administration hopes to allow trusted allies to benefit from the $7,500 electric vehicle tax credit in the Inflation Reduction Act by focusing on mineral-based trade agreements.
In the $7,500 tax credit, half is provided for cars and batteries assembled in North America, leading to quite tense relations with the European Union, Japan, and South Korea. The other half depends on the value of at least 40% of the critical minerals in the battery being extracted or processed in the US or countries that have signed free trade agreements with the US, or being recycled in North America.
The US Treasury is expected to determine procurement requirements for electric vehicle tax credits before the end of this weekend, providing guidance to the automotive, battery, and clean energy industries. However, when asked if this trade agreement would make batteries, components, and cars purchased from Japan eligible for this tax credit, US government officials stated that it depends on the Treasury.
Japanese Minister of Industry Yasutoshi Nishimura stated that electric vehicles manufactured using minerals mined or processed in Japan are expected to meet the requirements for tax credits under the US bill.
US officials stated that the US Trade Representative's Office does not intend to seek congressional approval for the mineral trade agreement, as this agency has the authority to negotiate industry trade agreements at the administrative level. However, they stated that the terms in the agreement to promote labor rights and battery mineral supply chain recycling will benefit both countries.
