The U.S. badly wants an electric vehicle battery industry, and it hopes that the tens of billions of dollars contained in the Inflation Reduction Act get it there. This week we look at the difficult policy choices ahead for the Biden Administration: China holds much of the world's battery-making know-how, but many U.S. officials are hostile to allowing Chinese companies to open factories in the U.S. and help the country get a quick footing.

The Biden administration, embarked on a $125 billion effort to create an American battery industry independent of China, seems likely to try to hamper or block plans for Chinese gigafactories in the U.S. If it does, that will hurt U.S.-based carmakers, at least for a while. But it would also be an opportunity: Automakers could strengthen their supply chains—and U.S. manufacturing—by investing more heavily in battery making, as they seem to be doing.

The administration is confronting two important issues: Should it allow Chinese battery or battery materials companies to build factories in the U.S.? If it does, should these factories qualify for tax credits in the recent law aimed at forestalling climate change? There are additional issues: Short of Chinese companies putting down stakes in the U.S., should the administration temporarily allow electric vehicle or battery companies to claim credits for Chinese-made materials or components that can’t be secured elsewhere? And should U.S.-based companies with partial Chinese ownership be able to claim credits, and if so how much such ownership should be permitted?