On Monday, the European Union threatened to retaliate against the US for its support of domestic automakers through subsidies for electric vehicles.
The “Inflation Reduction Act” in Washington, which would see significant investment in green energy initiatives and contains tax benefits for US-made electric cars and batteries, has angered the 27-nation bloc.
According to Brussels, these advantages for American electric vehicle manufacturers would unfairly disadvantage e-cars built in the EU on the lucrative US domestic market.
The Inflation Reduction Act makes a $7,500 tax credit available for the purchase of an electric vehicle, but the automobile must leave a US factory with batteries made in the country.
Because the subsidies “violate World Trade Organization standards,” Internal Market Commissioner Thierry Breton warned to take “retaliatory actions” against the US.
He stated on French radio and television station BFM Business that if Washington doesn’t take into account the opinions of its EU allies, the group should “go to the WTO” and present its concerns there.
Bruno Le Maire, the finance minister of France, demanded that the EU respond to the US actions “organized, united, and strongly.”
In an interview with the French daily Les Echos, the German newspaper Handelsblatt, the Spanish newspaper El Mundo, and the Italian newspaper Corriere Della Sera, Le Maire stated that “certain big foreign companies that wanted to come to Europe are now hesitating and considering between European and American sites.”
According to early projections from the French government, investments worth 10 billion euros are at risk. The EU pushed the US last week to offer it the same exemptions it does for vehicles made in Canada and Mexico.
A task team has been established by Brussels and Washington to attempt and come up with a solution. Germany, a hub of manufacturing in Europe, is particularly alarmed by the US credits and worried about the future of its important auto industry. Olaf Scholz, the German chancellor, issued a warning last month that the US actions may start “a big tariff war.”
