Brussels and Washington are locking horns on Joe Biden’s latest tax on electric vehicles produced outside the US, risking Russia and China to benefit from the trade conflict. Dividing the US and the European Union is the Inflation Reduction Act, Washington’s $370 billion maxi investment plan that provides direct subsidies to US companies operating in the green sector, and which contains incentives to buy electric vehicles only if they are made in the USA.
For the EU states, these are “discriminatory measures” in particular for European car manufacturers.
Jozef Sikela, Minister of Industry and Trade of the Czech Republic on the sidelines of the informal Trade Council which was held in Prague and which was also attended, as a guest, by the US Trade Representative, Kathrine Tai, said: “I will be frank: it is unacceptable for the EU. As it stands, this text is extremely protectionist, to the detriment of European exports. This point needs to be clarified.”
The ire of the EU27 is particularly directed at the incentive, up to $7,500, reserved for those who want to buy a new electric car.
To receive it, the consumer must buy a vehicle rigorously assembled in North America and containing a battery with a certain percentage of metals mined or recycled in the United States, Canada or Mexico. In fact, cars produced in the EU or Asia are excluded from the incentive.
Vice president of the European Commission, Valdis Dombrovskis, who is in charge of international trade, confirmed this saying: “It is an issue that worries many countries and companies, which I have raised with our US partners over the past few weeks, and has been at the forefront of today’s discussions. It would appear that many of the green subsidies required by law may discriminate against industries. ‘EU in the automotive, renewable energy, battery and energy-intensive sectors.”
To make things worse for the bloc, experts are warning that a trade war between Brussels and Washington could be a exploited by Russia at a time the West should look united in the face of the war on Ukraine.
Associate Fellow at the Henry Jackson Society, Darren Spinck, told Express.co.uk the row could be a “gift to the CCP and the Kremlin”.
He continued: “At a time when Washington hopes to maintain unity amongst America’s European and Indo-Pacific partners, deter China from forcing reunification with Taiwan, and move toward a political solution in Ukraine, the Biden Administration’s protectionism may allow Beijing and Moscow to exploit this fissure in Transatlantic trade relations.
“Russia and China will certainly aim to drive a wedge between Washington and Brussels, in hopes of re-establishing economic dependence for Europe with energy and other commercial sectors. The Biden Administration’s electric vehicle tax credit is a crude attempt to increase market share for domestic EV production and pivot American manufacturers from producing vehicles using minerals sourced in China.
“The US policy likely violates international trade provisions on national treatment, most favored nation status, and subsidies/countervailing measures. Washington risks not only alienating European trade partners, but key Indo-Pacific allies Japan and South Korea as well.”
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To face the risk of a new tug-of-war with the US at the World Trade Organisation, the EU has set up a task force that should meet in the coming days.
But the impression is that in Brussels internal divisions weigh more on China than those against Washington.
Net of the moves of Joe Biden, who is trying to regain consensus in view of the mid-term elections, the stone guest of the transatlantic tensions is Beijing.
China has started shipping its electric car models at more than competitive prices to the European market, at a time when EU manufacturers are struggling to deliver cars to their customers due to problems in the supply chain of essential components, such as microchips or the batteries themselves.
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To put a stop to this invasion, the Stellantis group has proposed to raise tariffs on imports of Chinese cars, but the big German car manufacturers – from Wolkswagen to Mercedes, passing through BMW – fear commercial retaliation from Beijing that would compromise their production. heavily dependent on parts assembled in China – like Tesla.
French President Emmanuel Macron would like a harder punch, even against US protectionist measures, and he proposed the possibility of a Buy European Act, that is a European law that favours the purchase of goods produced at home.
He told French TV earlier this month: “You have China that is protecting its industry, the US that is protecting its industry and Europe that is an open house.”
German Chancellor Olaf Scholz did not comment on the idea of the French colleague, but in Berlin they do not rule out the return of a war on tariffs with Washington as in Donald Trump’s time.