US, Japan strike deal on critical minerals for electric vehicles

March 28, 2023 (MLN): The United States and Japan have reached an agreement on trade in minerals that are key to electric vehicle batteries, US trade officials said Tuesday, a move to reinforce supply chains in a sector dominated by China.

Rare earth elements and minerals such as lithium are becoming increasingly important in clean energy technologies, but the United States is set to face gaps in such critical mineral supplies when it comes to meeting the expected demand for EVs, as reported by APP. 

The latest US-Japan deal includes commitments not to impose export duties on critical minerals shipped to the other country, said a statement released by the US Trade Representative (USTR).

"The United States and Japan share a common interest in strengthening supply chains between like-minded partners and increasing resilience against threats such as economic coercion," the USTR added.

Ambassador Katherine Tai said the agreement marks "a welcome moment" as Washington continues to work with allies and partners to boost supply chains, including through the Inflation Reduction Act (IRA).

That law stipulates that 40% of critical minerals in an eligible EV battery need to be extracted from, or processed in, countries that have free-trade agreements with America.

This figure is set to rise to 80% in 2027, and the rule would have excluded the European Union and Japan — drawing concern from both parties.

But the latest deal could allow critical minerals processed in Japan to qualify for some US subsidies under the act. The Treasury Department will issue a notice by the end of this month with proposed guidance on the IRA's critical minerals and battery components requirements.

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