LAST CHANCE FOR DEMS' INDUSTRIAL POLICY: The reconciliation package unveiled last week is likely the last chance Democrats have before the midterms — and maybe the presidential election — to deliver on Biden's promises to rebuild domestic manufacturing. For all the Buy American executive orders and billions in chips funding, the reconciliation package has always been the linchpin of the Democrats industrial policy push — representing a broader and more comprehensive plan for reshoring a variety of industries connected to clean energy and mobility. A new grab bag of incentives: The new agreement, unveiled after the chips bill passed last week, includes $10 billion investment tax credits for new manufacturing facilities, in addition to credits for continued production of clean energy technologies like wind, solar and battery components, as well as the critical minerals that comprise them. There's also money for automakers to retool their factories to produce electric vehicles, and expanded loans for new clean vehicle factories. "This is game-changing industrial policy," said Jesse Jenkins, an assistant professor at Princeton who has helped Democrats craft their climate and energy provisions. "I'm very optimistic." EV tax credit concerns: One key Democratic priority — a tax credit for electric vehicle buyers is back, and it's still causing lawmakers and staffers headaches in the final week before August recess. Reminder: The original EV tax credit caught flak from Canada, Mexico, the European Union and global automakers for stipulating the incentive would only be available for American-made, union-manufactured automobiles. The new edition tries to solve those issues by broadening the eligibility requirements to include automobiles manufactured in North America. There's just one problem: the supply chain. To qualify for the tax credits, vehicles need a certain percentage of their components made in America, with the proportion rising to 80 percent by 2027 and 100 percent in 2029. They also couldn't use any components or materials from China, or other entities the federal government deems concerning. That's a problem because the vast majority of processing for rare earth metals occurs in China today, and none in the U.S. That would mean that virtually no electric vehicles produced today could qualify for the credit. Our E&E News colleague Jael Holtzman ( follow her !) ran down the intricacies of the policy last week. Staffers worked over the weekend to try to alter the language of the agreement, but it's a tough political ask. Loosen the eligibility requirements, and you may open yourself to the charge you're being soft on China, or using taxpayer money to support industry there. That's a tough sell in a political climate where both parties are using China as a cudgel to bash the opposition in midterm campaigns. Time's short: Democrats will have to move quickly on the EV tax credit and the rest of the bill if they want to preserve their summer vacation. The Senate is scheduled to leave town until September at the end of this week, and Senate Majority Leader Chuck Schumer is already hinting that lawmakers may have to work into the weekend to get the package over the line. So keep your eyes on the Hill this week. IMMIGRATION CONCERNS CLOUD CHIPS BILL: Passage of the semiconductor subsidy bill last week had Democrats cheering out of the House chamber. But as our own Brendan Bordelon and Eleanor Mueller report, the real work is only beginning for chip companies. One of the many issues left unaddressed by the chips negotiation is immigration. A provision to allow a small number of foreign-born doctorates into the U.S. to work in specialized technology fields was cut after Republicans insisted that no immigration provisions move without the Biden administration further militarizing the border. That could make it tough for companies like Intel, which has planned an up to $80 billion expansion of Ohio microchip facilities upon receipt of the subsidies. It and other chipmakers have been reluctant to lobby for immigration reform directly for years, but now the urgency of their workforce concerns is starting to outweigh their caution. "We are seeing greater and greater numbers of our employees waiting longer and longer for green cards," said David Shahoulian, Intel's head of workforce policy. "At some point it will become even more difficult to attract and retain folks. That will be a problem for us; it will be a problem for the rest of the tech industry." "At some point, you'll just see more offshoring of these types of positions," Shahoulian said. Read more from Brendan and Eleanor's report here . U.S., JAPAN TAKE AIM AT ECONOMIC COERCION: The United States and Japan laid out a joint plan of action Friday to shore up the rules-based international order and ensure a "free and open Indo-Pacific region" in response to Russia's war in Ukraine and concern about China using either its huge economy or military to force other countries to bend to its will. "Supply chain risk, economic coercion, foreign security policy and economic policy have become inseparable," Minister of Economy, Trade, and Industry Hagiuda Koichi said at the conclusion of the inaugural meeting of the new U.S.-Japan Economic Consultative Committee. Japanese Foreign Minister Hayashi Yoshimasa, Secretary of State Antony Blinken and Commerce Secretary Gina Raimondo also took part in the talks. The four-part plan of action that came out of the meeting includes a pledge to counter "economic coercion and unfair and opaque lending practices," which Blinken made clear was a reference to China, although the country is not mentioned by name in the statement. The high-level dialogue came one day after final congressional approval of a $52 billion package to boost U.S. semiconductor production, a key focus of Biden administration efforts to build more resilient supply chains. "Semiconductors are the linchpin of our economic and national security, and we had an excellent discussion today around how Japan and the United States could collaborate, especially with respect to advanced semiconductors," Raimondo said. TPP > IPEF: Japan, the world's second largest democratic economy after the United States, is one of 14 countries participating in talks on the Indo-Pacific Economic Framework for Prosperity, the Biden administration's plan for increasing economic ties and strengthening trade rules in the region without making any tariff cuts. Both Hayashi and Hagiuda reiterated Japan's support for IPEF, but made clear they would rather see the United States back in the Trans-Pacific Partnership. Former President Donald Trump withdrew from the U.S.-led pact on his third day in office. "Japan strongly hopes for the return of the U.S. to the TPP at the earliest possible timing, as it bears great strategic importance," Hayashi said during a speech at the Center for Strategic and International Studies . Military deterrence: Hayashi also said there was "an urgent need" to strengthen the deterrence and response capability of the U.S.-Japan alliance in the face of Russia's aggression in Ukraine and China's growing military might. "We must never accept unilateral attempts to change the status quo by force, no matter where in the world," Hayashi said. USTR SECTION 301 TARIFF COURT RESPONSE DUE TODAY: USTR faces a court-ordered deadline today to more fully explain the Trump administration's rationale for imposing duties on an additional $320 billion worth of Chinese goods under the 2018 Section 301 investigation that initially targeted only $50 billion. In a case brought by more than 6,500 plaintiffs, the Court of International Trade stopped short of striking down the tariffs on the additional goods under the Trump administration's Lists 3 and 4. But it did order USTR to more fully explain its rationale for imposing the tariffs — without providing any new justifications for the action. USTR has been mum on what it will tell the court , but it's hard to imagine they won't come up with a reason to maintain the duties. Meanwhile, the trade agency still has not laid out the next steps in its mandatory four-year review of the tariffs that Trump imposed on all $370 billion worth of Chinese goods, nearly a month after the window closed for companies and other interested parties to request a continuation of the duties.
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