Janet Yellen Expects EV Subsidy Rules to Prompt New Trade Deals

President Biden’s Inflation Reduction Act calls for at least 50% of an electric vehicle’s battery to be made in the U.S. to qualify for a federal discount. WSJ’s George Downs breaks down a battery to explain why that is going to be a challenge. Illustration: George Downs

Treasury Secretary Janet Yellen said Japan and the European Union would need to negotiate new trade agreements with the U.S. to meet the mineral-sourcing requirements for an overhauled electric-vehicle tax subsidy.

As part of the 2022 Inflation Reduction Act, the U.S. revamped a tax credit for consumers who buy electric vehicles in hopes of reducing U.S. reliance on China. To qualify for the full $7,500 tax credit, among other requirements, 40% of the value of the minerals in an electric vehicle’s battery must come from a country that has a free-trade agreement with the U.S. That amount is set to rise to 80% after 2026.

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