US, EU to launch talks on free-trade-like status, easing EV trade dispute -sources

U.S. President Joe Biden and European Commission President Ursula von der Leyen are expected to agree on Friday to begin negotiations on ensuring free-trade agreement-like status for the European Union, two sources familiar with the plans said on Wednesday.

The leaders are set to meet in Washington on Friday.

Reuters reported last week that the United States and EU were working to make European minerals eligible for tax credits under the $430 billion U.S. Inflation Reduction Act (IRA), citing a senior EU official.

That law requires rising percentages of battery minerals to come from the United States or a Free Trade Agreement (FTA) partner.

A U.S. Treasury spokesperson said the department, which oversees the electric vehicle (EV) tax credits at the heart of the dispute, would evaluate any newly negotiated agreements to ensure they meet the critical minerals requirement of the tax credit during the rulemaking process.

"Given the extremely high concentration of Chinese control over critical mineral extraction globally, strengthening our supply chains for critical minerals along with like-minded partners is vital for the growth of the clean energy economy," the spokesperson said.

Working with allies to reduce U.S. reliance on China for critical minerals would aid U.S. energy and economic security, the spokesperson added.

Up to $3,750 per vehicle of the available tax credits relate to critical minerals for batteries, taking effect when the U.S. Treasury issues guidance, which is expected later this month.

The EU, South Korea, Japan and other U.S. allies have harshly criticized the IRA's provision requiring EVs to be assembled in North America to qualify for consumer EV tax credits.

But the EU in December 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.