Beautiful Virgin Islands

Friday, Aug 29, 2025

Electric cars rekindle transatlantic trade war

Electric cars rekindle transatlantic trade war

Europe is incensed over a generous subsidy encouraging US consumers to ‘Buy American’ when it comes to greener cars.

If you thought transatlantic trade wars were a forgotten relic of Donald Trump's presidency, think again.

The EU is threatening to pull out the big guns if Washington doesn’t change its new tax credits for electric vehicles, which will incentivize U.S. consumers to "Buy American" when it comes to getting a greener car.

Since the Europeans are pinning their industrial ambitions on the transition to electric vehicle technology, the dispute will be the elephant in the room when EU trade chief Valdis Dombrovskis meets his U.S. counterpart Katherine Tai (virtually) on Thursday.

“This has the potential of becoming a new Airbus-Boeing,” said one EU trade diplomat, referring to the 17-year-long transatlantic trade war over subsidies for the plane makers Airbus and Boeing.

The European Commission slammed the U.S. measure as a “new and significant transatlantic trade barrier by the U.S." A European Commission spokesperson said the EU will consider all options, including bringing a case against the U.S. to the World Trade Organization.

After years of successfully trying to resolve transatlantic trade conflicts, the new subsidies are throwing a spanner in the works, just as the West seeks to forge a united economic front against Russia and on tackling climate change.

“We could do without an additional trade irritant between partners in such a very difficult global context,” said Bernd Lange, the European Parliament’s trade committee chair.


Protectionism in disguise?


The new tax credits for electric vehicles are part of a huge U.S. tax, climate and health care package, known as the Inflation Reduction Act, which passed the U.S. Congress in August.

The big idea is that a U.S. consumer can claim back $7,500 of the value of an electric car from their tax bill. But to qualify for that credit, the car needs to be assembled in North America and contain a battery with a certain percentage of the metals mined or recycled in the U.S., Canada or Mexico. Those rules become more strict over time, giving American producers time to prepare.

The bill aims to reduce U.S. dependence on countries such as China for the critical materials in the electric car industry. It wants to help the transition to electric vehicles and at the same time create jobs in the U.S., a key policy goal for President Joe Biden.

Indeed, the U.S. has used the need for a shared approach to China in its argument hitting back against EU criticism.

“This bill provides strong incentives to reduce our dependence on China for the critical materials that will power this key industry, and we look forward to working with allies and partners to advance our climate goals, strengthen and diversify our supply chains, and address our shared concerns with China’s non-market policies and practices,” said Adam Hodge, a spokesperson for the office of Trade Representative Tai.

David Kleimann, a trade expert at the Bruegel think tank, was unimpressed with the U.S. position, which he argued marked a setback for the European Commission's efforts to clear up economic relations with the U.S.

This aerial photo shows the Tesla factory under construction in 2019 in Shanghai, China


"After inventing the concept of 'friend-shoring' last year, the [U.S. Trade Representative], the Treasury, and affiliates seem to slowly but surely run out of semantic innovations to disguise blatantly protectionist policies — 'near-shoring' being the most recent somewhat cringeworthy word creation," Kleimann said.

The EU car lobby ACEA said the measures undermined WTO rules and would also slow down the shift toward electric vehicles, as the local content requirements for batteries didn't reflect “reasonable expectations” for building a local battery supply chain.

The EU warned such tax credits shouldn’t distinguish between foreign and domestic car manufacturers. The European Commission called the bill “discriminatory,” in violation of WTO rules and said they risked undermining shared EU-U.S. climate ambitions. Brussels is now looking into whether to follow South Korea's lead and start a case at the World Trade Organization, although EU trade diplomats still have to discuss how to handle the new trade irritant.

Lange, the Parliament’s point person on transatlantic trade relations, said the EU should consider starting a WTO case if the U.S. fails to address EU concerns “within a reasonable timeframe.”


Tit for tat


If Brussels does eventually end up at the WTO, the road toward a solution is set to be long.

The WTO’s Appellate Body, the world's highest dispute-resolution body for trade, is still in limbo due to an American blockade against appointing new judges over complaints about how it functions. But the U.S. also has not signed up for the interim court that was created in its absence, which would make it difficult for Brussels to enforce any victories over Washington.

Precisely to address these kinds of situations, the EU last year introduced new enforcement rules, which allow retaliation when a trade dispute is blocked at the WTO.

Kleimann said the Commission is likely to proceed with caution to try to find a diplomatic solution such as scrapping the measure or concessions in other areas. But he acknowledged the odds of such a resolution were low and cautioned that this dispute may well "eventually result in the first unilateral EU retaliatory measure under the reformed enforcement regulation."

This risks triggering a politicized downward spiral of retaliatory tariff measures, which brings back dark memories of the transatlantic trade wars under Trump, who had argued that "trade wars are good, and easy to win."

Since Dombrovskis took over the EU's trade portfolio two years ago, he has cast himself as a transatlantic peacemaker. Washington and Brussels in recent years called a truce in their festering feud over subsidies paid to airplane makers and on steel tariffs launched against one another.

Brussels and Washington also set up a new body that aims to put the antagonism of the Trump era behind them to cooperate in areas such as robotics, microchips and artificial intelligence. Brussels is frustrated the tax credit was not brought up in technical meetings in the context of that Trade and Technology Council, two EU diplomats said.

But it's not just the lack of communication that led to bad blood — it's also the policy itself. When the EU and the U.S. were seeking a compromise on steel tariffs, there was a broad understanding in EU capitals about the limited room for maneuver that Biden had, especially as steel producers, unions and a section of his party were ramping up pressure ahead of the U.S. midterm elections.

This time around, EU officials are not cutting Biden so much slack.

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Bruce Willis Relocated Due to Advanced Dementia
French and Korean Nuclear Majors Clash As EU Launches Foreign Subsidy Probe
EU Stands Firm on Digital Rules as Trump Warns of Retaliation
Getting Ready for the 3rd Time in Its History, Germany Approves Voluntary Military Service for Teenagers
Argentine President Javier Milei Evacuated After Stones Thrown During Campaign Event
Denmark Confronts U.S. Diplomat Over Covert Trump-Linked Influence in Greenland
Starmer Should Back Away from ECHR, Says Jack Straw
Trump Demands RICO Charges Against George Soros and Son for Funding Violent Protests
Taylor Swift Announces Engagement to NFL Star Travis Kelce
France May Need IMF Bailout, Warns Finance Minister
Chinese AI Chipmaker Cambricon Posts Record Profit as Beijing Pushes Pivot from Nvidia
After the Shock of Defeat, Iranians Yearn for Change
Ukraine Finally Allows Young Men Aged Eighteen to Twenty-Two to Leave the Country
The Porn Remains, Privacy Disappears: How Britain Broke the Internet in Ten Days
YouTube Altered Content by Artificial Intelligence – Without Permission
Welcome to The Definition of Insanity: Germany Edition
Just a reminder, this is Michael Jackson's daughter, Paris.
Spotify’s Strange Move: The Feature Nobody Asked For – Returns
Manhunt in Australia: Armed Anti-Government Suspect Kills Police Officers Sent to Arrest Him
China Launches World’s Most Powerful Neutrino Detector
How Beijing-Linked Networks Shape Elections in New York City
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
2 Australian Police Shot Dead In Encounter In Rural Victoria State
Vietnam Evacuates Hundreds of Thousands as Typhoon Kajiki Strikes; China’s Sanya Shuts Down
UK Government Delays Decision on China’s Proposed London Embassy Amid Concerns Over Redacted Plans
A 150-Year Tradition to Be Abolished? Uproar Over the Popular Central Park Attraction
A new faith called Robotheism claims artificial intelligence isn’t just smart but actually God itself
Deputy Prime Minister Angela Rayner Purchases Third Property Amid Housing Tax Reforms Debate
HSBC Switzerland Ends Relationships with Over 1,000 Clients from Saudi Arabia, Lebanon, Qatar, and Egypt
Sharia Law Made Legally Binding in Austria Despite Warnings Over 'Incompatible' Values
Italian Facebook Group Sharing Intimate Images Without Consent Shut Down Amid Police Investigation
Dutch Foreign Minister Resigns Amid Deadlock Over Israel Sanctions
Trump and Allies Send Messages of Support to Ukraine on Independence Day Amid Ongoing Conflict
China Reels as Telegram Chat Group Shares Hidden-Camera Footage of Women and Children
Sam Nicoresti becomes first transgender comedian to win Edinburgh Comedy Award
Builders uncover historic human remains in Lancashire house renovation
Australia Wants to Tax Your Empty Bedrooms
MotoGP Cameraman Narrowly Avoids Pedro Acosta Crash at Hungarian Grand Prix
FBI Investigates John Bolton Over Classified Documents in High-Profile Raids
Report reveals OpenAI pitched national ChatGPT Plus subscription to UK ministers
Labour set to freeze income tax thresholds in long-term 'stealth' tax raid
Coca‑Cola explores sale of Costa coffee chain
Trial hears dog walker was chased and fatally stabbed by trio
Restaurateur resigns from government hospitality council over tax criticism
Spanish City funfair shut after serious ride injury
Suspected arson at Ilford restaurant leaves three in critical condition
Tottenham beat Manchester City to go top of Premier League
Bank holiday heatwave to hit 30°C before remnants of Hurricane Erin arrive
UK to deploy immigration advisers to West Africa to block fake visas
×