Here’s How China Could See A Massive Windfall From Dems’ Big Spending Bill

Jack McEvoyAugust 8, 2022

President Joe Biden’s Treasury Department could bend the rules of the Senate Democrats’ climate bill that does not allow electric vehicles (EVs) whose materials are largely produced in China, to qualify for a tax credit, according to Politico.

The “Buy American” provisions in the budget agreement that the Democrats passed on Sunday mean that tax credits do not apply to any current electric car on the market, according to Politico. However, the Treasury Department and Internal Revenue Service (IRS) may be able to alter or altogether waive the requirement as the agencies have the power to decide how U.S. companies can interact with “entities of concern” like China, Politico reported. (RELATED: Senate Dem, Automakers Working To Kill ‘Buy American’ Provision In Climate Bill, Keep Sourcing In China)

The federal agencies can determine the criteria to judge just how much of an EV battery is created by China or other foreign nations, Politico reported. Additionally, trade executives and state departments of transportation say that it is difficult to find out where battery and EV materials are coming from, which could make it harder for regulators to enforce “Buy American” standards and waive them instead.

Previously, the Department of Transportation (DOT) temporarily waived “Buy American” regulations following the passage of the 2021 infrastructure package to give states more time to adjust to the new rules, according to DOT documents.

Democratic Sen. Joe Manchin of West Virginia originally pushed for the tax credit restrictions in order to push EV supply chains out of Chinese hands in the interest of national security, according to E&E News. The bill stipulates that 40% of battery materials must be obtained from North America or a U.S. trading partner in order to qualify for the electric vehicle tax credit starting in 2024, and increasing up to 100% in 2029, according to the bill’s text.

Lawmakers, as well as automakers, requested a delay in the implementation of the requirements for the tax credits to allow firms to transition their mineral sourcing supply chains more domestically, arguing that the rules were too harsh to benefit any party. Automakers hope the bill’s tax credits of up to $7,500 will incentivize more consumers to buy pricier EVs.

Here’s How China Could See A Massive Windfall From Dems’ Big Spending Bill 1

This photo taken on March 12, 2021 shows workers at a factory for Xinwangda Electric Vehicle Battery Co. Ltd, which makes lithium batteries for electric cars and other uses, in Nanjing in China’s eastern Jiangsu province. (Photo by STR/AFP via Getty Images)

China was responsible for 60% of the global production of cobalt and rare earth materials in 2019, elements that are essential for producing EVs, according to a 2021 International Energy Agency report. China’s dominance is even more evident when one considers processing, where its share of refining is around 35% for nickel, 50% to 70% for lithium and cobalt and nearly 90% for all rare earth elements.

The “clean vehicle” tax credits in the Democrats’ bill come as part of the Biden administration’s aggressive climate agenda at a cost of $7.5 billion over the next 10 years, according to the Joint Committee on Taxation.

The Treasury Department and IRS did not immediately respond to the Daily Caller News Foundation’s request for comment.

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