Japan and the USA challenge China on electric cars: an agreement on metals for the production of batteries

Milan – the United State and the Japan Strengthening the alliance on the electric battery supply chain, in order to facilitate the Japanese industry’s access to the tax exemptions stipulated in the inflation reduction law launched by President Biden, through an agreement on the trade in minerals necessary for the production of batteries.

This was stated by US trade sources, explaining that the aim is to strengthen supply chains in a sector dominated by China. Rare earth elements and metals such as lithium are becoming increasingly important to clean energy technologies, but severe supply shortages are expected as a result of the growing demand for electric vehicles. The agreement between the United States and Japan includes a commitment not to impose export duties on critical minerals shipped to the other country, according to the statement from the United States Trade Representative (USTR). “The United States and Japan share an interest in strengthening supply chains among like-minded partners and increasing resilience in the face of threats such as economic coercion,” the Office of the United States Trade Representative added.

Ambassador Catherine Tay said the deal represented a “positive moment” as Washington continues to work with allies and partners to strengthen supply chains, including through the Inflation Reduction Act (IRA), which mandates that 40% of the critical minerals found in a qualifying electric vehicle must be mined. The battery is or processed in countries that have free trade agreements with America. The percentage is set to rise to 80% in 2027 and the law would have excluded the European Union and Japan, worrying both sides. The signed deal opens the door for critical minerals processed in Japan to benefit from some of the US subsidies under the law.

The Treasury will issue a notification later this month with proposed guidelines on requirements for IRAs for critical metals and battery components. The deal covers the five most important metals for electric vehicle batteries and will be reviewed every two years, according to the sources. On the occasion of the visit to the United States of America by the President of the European Commission, Ursula von der Leyen and President Joe Biden, we announced the start of negotiations on a deal on critical minerals that would allow the relevant resources extracted or processed in the European Union to benefit. Grants from the Inflation Control Act, a $370 billion package for greenhouse gas reductions.