The US government is exploring narrowly focused trade pacts on critical minerals with Japan and the UK, in addition to talks with the European Union, the latest salvo in its push to counter Chinese influence in key sectors, officials familiar with the matter said.
The US is looking to create a “critical minerals buyers club” with allies like the EU and Group of Seven, the US officials said, speaking on condition of anonymity. The move would ensure the bloc is not reliant on China for critical minerals, particularly as the countries look to build out renewable energy pacts, the officials said.
So-called rare Earth elements and minerals including lithium and cobalt have assumed huge strategic importance because of their role in electric-vehicle technology, defense electronics and other uses. Especially worrisome to the US and its allies is China’s geological fortune in having supplies within its borders and its moves to lock up agreements with other producers — potentially cutting off US access in the event of a crisis with Beijing.
The deals, while aimed at China, could also make the countries eligible for benefits from the Inflation Reduction Act, soothing a key irritant over industrial incentives.
The White House did not immediately respond to a request for comment. The Treasury declined a request to comment.
The development adds Japan and the UK to the list of countries where the US is seeking critical mineral pacts. The US had already been in talks with the EU over such a deal.
The US has long been pushing to secure supply chains of critical minerals, including through a Minerals Security Partnership that includes the EU, UK and Japan, as well as other countries such as Australia and South Korea. That group held a meeting earlier this week to discuss mining, processing, and recycling of critical minerals with representatives of several African nations, according to the State Department.
The push is part of President Joe Biden’s effort to shift global supply chains away from China, blunting Beijing’s clout in key sectors and hedging against disruptions — like the Covid-19 pandemic — that would upend supply chains or create scarcities that may starve US or other friendly producers.
Part of the joint push is driven by a desire to make sure the US is not reliant on China for critical minerals, the officials said.
It will also mean the US and its allies have access to the inputs needed to meet emission-reductions goals, according to the officials.
Participating countries would be eligible under Section 30D of the Inflation Reduction Act, an incentive aimed at promoting new electric vehicles, officials said.
A pact that clears the way for benefits under the IRA would help sooth tensions with Europe, which has complained that the provision freezes out American partners. Biden’s administration has responded by pledging cooperation and encouraging European allies to pass their own domestic subsidies.
“This is one of the most promising ways to go forward,” German Economy Minister Robert Habeck told Bloomberg TV in an interview Monday, referring to a possible agreement on organizing a market for critical minerals.