US trade officials announced late Monday that the United States and Japan had reached an agreement on trade in minerals essential to the manufacture of electric vehicle batteries, strengthening supply chains in a market dominated by China. Although rare earth elements and minerals like lithium are becoming more crucial in clean energy technologies, the United States is likely to experience shortages of these vital mineral supplies when trying to meet the anticipated demand for electric vehicle batteries and EVs. According to a statement issued by the US Trade Representative, the most recent US-Japan agreement includes commitments not to impose export duties on critical minerals sent to the other country.
According to that law, 40 percent of the essential minerals in an eligible electric vehicle batteries must be mined or processed in nations with which America has free-trade agreements.
The rule would have excluded the European Union and Japan, raising concerns from both. By 2027, this percentage is expected to reach 80%. However, the most recent agreement makes it possible for vital minerals processed in Japan to be eligible for some US subsidies under the act. By the end of this month, the Treasury Department will publish a notice with proposed guidance on the requirements for critical minerals and electric vehicle batteries components under the IRA.
A senior US administration official stated that strengthening the supply chain for critical minerals “advances economic security and stability by ensuring the United States and allies and partners are not reliant on other countries for critical minerals.” According to the official, the agreement, which covers five essential minerals, will be reviewed every two years.
The US and Japan agreed to share “best practices regarding review of investments within their territories in the critical minerals sector by foreign entities,” according to the USTR. The start of negotiations on a crucial minerals agreement to allow the relevant resources extracted or processed in the European Union to qualify for IRA subsidies was announced this month by US President Joe Biden and top EU official Ursula von der Leyen.
A total of $370 billion from the IRA will be used to reduce greenhouse gas emissions, with some of those funds coming in the form of tax breaks for businesses that invest in clean energy as well as subsidies for electric cars, electric vehicle batteries, and renewable energy projects — provided those products are made in the US.
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