A new trading arrangement agreed between Rishi Sunak, the UK Prime Minister, and US President Joe Biden, may help the UK’s electric vehicle industry compete with US manufacturers, in the form of a critical minerals agreement.
Under the green funding package, the US and UK will begin talks on a trade deal over materials such as cobalt, graphite, and nickel, all of which are crucial to batteries used in EVs.
Unveiling the Atlantic Declaration at a press conference held at the White House, the two leaders highlighted the importance of the UK-US relationship as an “indispensable alliance.”
While the agreement falls short of a full trade deal, it aims to bring benefits to both countries as quickly as possible. One of the key provisions of the Atlantic Declaration is the potential access for UK electric car firms to US green tax credits and subsidies. This move would enable UK companies to tap into the US market and take advantage of incentives offered to promote the adoption of electric vehicles.
When questioned about whether the Atlantic Declaration reflects a failure to secure a broader trade agreement, Sunak emphasised that the current deal focuses on addressing specific challenges and opportunities faced by both nations.
In terms of green funding, the Atlantic Declaration aims to mitigate the impact of the US Inflation Reduction Act (IRA) on the UK economy. This includes proposals to remove barriers that affect the trade of electric vehicle batteries. Currently, the IRA provides tax credits for EVs manufactured in the US or those that use components sourced within the country.
However, countries without a US trade deal are unable to access IRA subsidies. The declaration commits the UK and US to work on a critical minerals agreement, which would allow buyers of vehicles made using critical minerals processed, recycled, or mined by UK companies to access tax credits. This agreement will be launched after consultation with the US Congress.