Cobalt, lithium, and copper are the critical minerals necessary to produce rechargeable lithium-ion-based batteries, and they are central to the electric vehicle (EV) supply chains in the energy transition. The importance of these minerals—and China’s strategic control of them—now compels the United States and its allies to diversify their supply chains for this essential resource.

“Changing geopolitical dynamics and new US domestic political configurations offer both a challenge and an opportunity to the energy transition,” says Diego von Vacano, a Wilson Center Fellow and a professor of political science at Texas A&M University.

The US and Japan are demonstrating increasing interest in cooperation in this new landscape. Given their mutual interests, there is a pathway for Japan and the US to pursue trilateral partnerships with mineral-producing nations in Latin America such as Argentina, Chile, and Bolivia, which may benefit from such diversified partnerships. 

Policy Landscape: De-risking Mineral Supply Chains

As geopolitical tensions escalate, diversifying—or “de-risking”—away from China (including in the critical mineral sector) has become a US priority. The Biden Administration took action to strengthen domestic industries through the Inflation Reduction Act and Bipartisan Infrastructure Law. These measures also incentivized domestic exploration and refinement of critical minerals and rare earths. President Donald Trump’s new National Energy Emergency order made it clear that decoupling from China on critical minerals will continue.

The new US administration also proposed imposing additional tariffs on Chinese goods even before taking office. Vacano observed that these “possible trade tariffs are eliciting drastic responses from China on critical minerals.” China recently announced export bans for gallium, germanium, and antimony—a move projected to hit the US manufacturing industries, including semiconductors and space products.

Japan also has taken proactive measures to secure critical mineral supply chains to meet economic security concerns. It is currently losing its competitive edge in the vehicle industry, as its EV industries make up a small share of the market compared to its fossil fuel cars. To bolster competitiveness and promote economic security in that sector, Japan passed the Battery Industry Strategy (2022), which promotes its domestic battery manufacturing capacity.

A larger 2022 Economic Security Promotion Act identified 36 priority minerals critical for Japan’s economic stability, several of which are crucial for manufacturing EV batteries. Japan’s Resource Green Transformation (GX) Diplomacy Guideline also puts forth approaches to focus on battery manufacturing that strategically prioritize minerals such as lithium, nickel, and graphite. To secure these strategic minerals, Japan, which already imports substantial amounts of lithium from Chile, aims to strengthen its partnerships with Latin American countries.

A New Landscape for Cooperation

As the US and Japan independently seek to secure their critical mineral supply chains, each country’s industrial interests might be strengthened by collaboration in Latin America.

Momentum for cooperation already exists. In 2023, the US and Japan signed the Critical Minerals Agreement (CMA), which limits export duties on EV batteries. The agreement also promotes recycling and sustainable practices while encouraging policy cooperation and solutions for fair labor practices.

Bilateral partnerships have also yielded public-private partnerships for joint research and development on clean energy battery technologies. Japanese companies like Toyota are collaborating with American research institutions to advance clean battery technologies, while the Japan Organization for Metals and Energy Security (JOGMEC) is poised to partner with US-based firms under the newly established Minerals Security Partnership Finance Network.

Such collaboration could be extended to the critical mineral industry in Latin America. “Western states like the US and allies like Japan now have an opening to seek new and more secure critical minerals supply chains,” Vacano explained. “Latin America is one such alternative with a long-term potential that needs to be explored.”

Potential for Latin America’s Critical Mineral Industries

Latin America holds significant reserves of the minerals needed to produce EV batteries and EVs. Yet the lithium, copper, and cobalt found in countries like Brazil, Chile, Peru, and Panama are often exported as raw materials to China, where value-added processing and refining occurs. For example, around 50% of the copper currently produced in Chile is imported by China.

Chinese companies do increasingly promote industrial development, including building local processing, battery manufacturing, and other value-added processes in the region. But it is vital for Latin America to diversify its external stakeholders to ensure it is not solely dependent on China.

The opportunity for trilateral partnerships in which Latin America serves as the midstream mineral processor, Japan manufactures EV batteries, and EV vehicle manufacturers in the United States provide a final product offers an avenue for mutual gains. The US and Japan could promote foreign direct investments in joint ventures and support mining technologies essential for EV market growth. Latin American countries would secure alternative investments for raw, processed, and refined critical minerals while supporting self-determined development and climate goals.

Public-private partnerships could enable Chile to strengthen its copper industries through manufacturing products such as wires, cables, or EV components themselves. And Bolivia’s underdeveloped mining industry might find the chance to leapfrog to integrated lithium extraction and refining industries appealing. In countries like Bolivia, mining developments often lead to the displacement of local and indigenous peoples. Development programming and policy efforts must address such human rights issues, in addition to ongoing illegal mining, modern slavery, and abuse of labor rights to advance sustainable development in Latin America.

One model for sustained multilateral partnerships in the mining industry can be found in the Japan Organization for Metals and Energy Security (JOGMEC), which provides financial assistance to build capacity and encourages sustainable practices in resource-rich nations. The longstanding US-Japan cooperation on development could also include a regional focus on Latin America, with engagement from Japan’s International Cooperation Agency (JICA) and USAID.

Building on the steady US-Japan cooperation, these agencies can further partner with local institutions such as Chile’s Sovereign Wealth Fund (SWF) and Codelco (the state-owned enterprise) to strengthen labor rights provisions and project implementation efforts. Such institutions promote workers’ welfare through social programs, labor protection policies, sustainable investments, and support for unions.

Friendshoring critical mineral supply chains offers a more viable approach for the US than reshoring, particularly given the nascency of domestic mining industries. Strengthening cooperation with Japan and investing in Latin America’s industries presents significant opportunities to advance the security and sustainability of critical mineral supply chains.