EV battery materials tariffed
US reaches trade deal with Japan, puts 93% tariff on Chinese graphite
The US has struck a trade deal with Japan, reducing the threatened tariff rate of 25% on goods imported to the US to 15%, providing Japan invests $550 billion in the US.
The US-Japan deal includes reducing vehicle imports and automotive parts imports from 27.5% (the current rate for non-USMCA compliant vehicles and parts imports) to 15%.
On social media, US president Donald Trump said the deal was “perhaps the largest deal ever made”, with the US treasury secretary Scott Bessent adding that the Japanese investment will fund major projects in the US.
What the US-Japan deal means for the automotive industry
For the automotive industry, the trade agreement means that Japanese carmakers have the upper hand by moving cars from Japan directly to the US, rather than importing from nearshoring countries like Mexico or Canada where Japanese carmakers have significant production, and where tariffs on cars and parts are 25% if in compliance with USMCA content rules.
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In Canada, Toyota and Honda have facilities in Ontario, while Nissan, Toyota, Honda and Mazda have facilities across Mexico.
Interestingly, the deal with Japan does not address the 50% tariff on aluminium, steel and copper imports.
The American Automotive Policy Council (AAPC), which represents GM, Ford and Stellantis, has reacted negatively to the deal, arguing that it will be bad for US industry and US automotive workers.
The deal with Japan follows similar agreements with Indonesia (19% tariffs) and the Philippines (19% tariffs).
The European Union (EU) looks likely to try to reach a similar deal with the US for a 15% baseline tariff on imports including for vehicle and automotive parts. The European Commission agreed today (23 July) that it would retaliate to a 30% tariff on EU imports to the US, threatening tariffs on €100bn (£87bn) worth of US imports to the bloc, unless a deal is agreed by the end of next week.
Tariffs on Chinese graphite
At the same time, the US Commerce Department has imposed preliminary anti-dumping tariffs of 93.5% on Chinese graphite imports, with tariffs potentially going up to 700% for specific companies. The department will determine the final duty rate at the end of this year.
The move could encourage US production of graphite, an important material in the manufacturing of EV batteries, as well as brake linings, lubricants, and powdered metals. In 2020, the US was 100% reliant on graphite imports from countries including China, Mexico, Canada and India, according to the US Geological Survey 2021, with China controlling about 90% of the market. With tariffs on exports from the other countries providing graphite to the US, there is a higher incentive for the country to produce it domestically and localise supply chains.
However, graphite has not been produced domestically since the 1950s. Titan Mining is planning to open a graphite mining site in the town of Fowler, New York, although this will not be open and operational for at least a few years.
China has previously put controls and restrictions on the export of high-quality graphite to the US, including in 2023, when China cited national security concerns over the export.
