Brussels and the U.S. in economic conflict

Europe and the US are headed for a trade war. For example, the EU is concerned about the new US ‘deflationary act’, which strongly favors companies in the US. President Joe Biden signed his scribble into law in August, and ‘Buy American’ has been a watchword ever since. ‘Europe is not waiting for this,’ says FD reporter Rhea Gates.

For example, under the Inflation Reduction Act, Americans will receive up to $7,500 in subsidies starting Jan. 1, 2023, when they buy an electric car equipped with a domestically produced battery in the United States. According to FD Joe Biden ‘sells’ IRA a climate bill, European Commission finds mainly protectionist

The law gives US companies millions in tax breaks if they invest in sustainable jet fuel, wind farms, hydrogen, battery generation, solar energy and other sustainability initiatives. In total, Biden is allocating $369 billion for the law.

European fear

Gates says that the European Commission mainly fears that the IRA will encourage companies to shift production from the EU to the US. According to Cats, European businesses are already in dire straits because of the energy crisis and the war in Ukraine, and prices in the U.S. are significantly lower than here. According to the European Union, the IRA violates international trade rules.

European officials say they are concerned about ‘the way financial incentives are designed under the law’. Gates says the IRA is a bigger concern for Europe, which has branded the measures discriminatory.

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A task force has been wrangling the matter between the US and Europe for some time, but ‘it’s not going well,’ says Gates. On December 5, a summit of sorts will take place in which Europe wants to make its case to the Americans, but it is uncertain whether it will bring comfort. Earlier, the Americans said Europe should also increase subsidies to the business community. An additional complication is that the law was passed despite fierce Republican opposition, so Biden doesn’t have much room to maneuver to change the law.

The law takes effect on January 1, so Europe has six weeks to develop a response. Brussels is now aiming for the same privileged status as Canada and Mexico, but behind the scenes Brussels is already threatening higher import tariffs on US products.

Read Rhea Gates’ full article on FD here