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US And EU Clash Over Electric Car Subsidies

The EU has threatened to retaliate against the US for electric car subsidies that favour domestic manufacturers.

The European Union (EU) has spoken out against US President Joe Biden’s Inflation Reduction Act, which includes tax breaks for US-made electric vehicles (EV) and batteries.

In the view of Brussels, those benefits would put e-cars made in the EU at an unfair disadvantage in the lucrative US domestic market. European ministers also fear their complaints have not been listened to by Washington. 

“I’m not sure whether they are aware of our concerns,” said Christian Lindner, Germany’s finance minister, stating that politicians should do “everything to avoid a tit-for-tat scenario or even a trade war.”

His French counterpart, Bruno Le Maire, said he expected the European Commission to come up with “a strong response to this US policy”, which it said could “harm this level playing field between the European companies and American companies.”

Under the Inflation Reduction Act, households could receive up to $7,500 (£6,140) in tax credits to buy an electric car or $4,000 (£3,275) for a used one.

To qualify for the tax credit, the bill would require that EV to contain a battery built in North America and using minerals mined or recycled on the continent.

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Although the condition is part of President Joe Biden’s push towards increasing the US’ battery production capabilities and reducing dependence on overseas supply chains, the European Union and South Korea have, in the past, expressed concerns over the proposal, arguing that it would break World Trade Organisation rules.

On Monday, internal market commissioner Thierry Breton threatened to take “retaliatory measures” against the US, calling the subsidies “contrary to World Trade Organisation rules”.

If Washington doesn’t take into account the views of its EU partners the bloc could “go to the WTO” and make its arguments there, he said on French radio and TV station BFM Business.

Brussels and Washington have set up a task force to try to hammer out a solution.

The EU’s trade commissioner, Valdis Dombrovskis, said as he arrived for the Brussels meeting that the issue was being discussed “extensively” with US counterparts, as well as through the joint task force.

The ban on tax credits for vehicles assembled outside of North America would allocate $369bn (£302bn) to reducing greenhouse gas emissions and investing in renewable energy sources. The US government expects these measures will reduce America’s planet-heating emissions by about 40 per cent by 2030, compared with 2005 levels.

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When signed into law, the Act will become the largest investment the US has ever made to tackle climate change and reduce the country’s carbon emissions.

Source: E&T


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