McCaul, Kim Urge Treasury to Coordinate With State, Commerce, Mitigate Damaging Impacts of Partisan IRA

“While the guidance released by the Treasury Department in February 2023 is a step in the right direction, more action must be taken to ensure our allies are not unduly harmed by this law,” the members wrote. “We cannot afford – economically nor militarily – to lose key allies in the Indo-Pacific while the PRC is expanding their military and economic might in the region. Instead, we must focus our efforts on working with allies and partners to build a resilient supply chain that can both supply our economic demands and counter PRC malign influence.”

After the IRA was signed into law last year, South Korea and Japan, both key U.S. allies in the Indo-Pacific, voiced concerns with the provisions surrounding subsidies of EV battery manufacturing and final assembly requirements. In the IRA, the $7500 consumer tax credit is barred to EVs if their battery components were manufactured or assembled by a “foreign entity of concern” or if batteries contain critical minerals extracted, processed, or recycled by a foreign entity of concern. This provision aims to reduce U.S. reliance on the People’s Republic of China battery supply chain, which is an admirable goal, but in practice could unfairly limit our partners, such as Japan and South Korea, with whom the U.S. shares trade agreements. This harms our allies economically at a time when they are vulnerable to PRC economic coercion and when the U.S. needs a strong Indo-Pacific economic presence to maintain the current balance of power.