The United States and European Union are currently engaged in negotiations aimed at achieving an agreement in principle on the taxation of European minerals. This senior EU official made this announcement on Friday, noting that the deal could be reached as soon as next week, in time for a visit by European Commission President Ursula von der Leyen to Washington. The deal, if reached, would grant the EU “free trade agreement-like status” and make European minerals eligible for tax credits.
The Inflation Reduction Act passed in August by the US requires rising percentages of battery minerals to come from the United States or a Free Trade Agreement (FTA) partner. The EU official stated that an agreement needed to be reached soon to avoid disturbances that could arise from some European companies’ moves to shift production to the United States. The official acknowledged that the U.S. side was pressing for the agreement to be “legally binding,” but it would be difficult to have that in place before von de Leyen’s visit.
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The agreement would be limited, according to the official, and not include market access, and would certainly not be a free trade agreement in the classical way. The EU, South Korea, Japan, and other U.S. allies have harshly criticized the IRA’s provision requiring EVs to be produced in North America to qualify for consumer EV tax credits. However, in December, the EU praised a U.S. Treasury Department decision to allow EVs leased by consumers to qualify for up to $7,500 in commercial clean vehicle tax credits.
White House press secretary Karine Jean-Pierre declined to speculate on whether a high-level agreement could be reached before von der Leyen’s visit, underscoring Washington’s desire to maintain a strong working relationship with the EU. She emphasized that the U.S. was committed to making sure there was a good working relationship between the two parties.
Up to $3,750 per vehicle of the available tax credits relate to critical minerals for batteries, and this takes effect when the U.S. Treasury issues guidance, which is expected later this month. The EU official said it was critical to reach an agreement soon to have better access when it comes to raw materials and battery production, for example, and to at least avoid as many disturbances as possible by granting an FTA-like status. He stated that the commitment to do this, and to do it quickly, could well be an outcome of next week’s discussions.
