Americans cut off the European imports with Inflation Reduction Act

Europe and the United States are heading for a trade conflict. For example, the EU is concerned about the new US ‘Inflation Reduction Act’, a law that greatly benefits companies in the United States. President Joe Biden put his scribble under the law in August, since then “Buy American” has been the watchword.

For example, under the Inflation Reduction Act (IRA), Americans will receive a subsidy of up to $ 7,500 from January 1, 2023, when they buy an electric car made in the USA that is equipped with a locally produced battery. Joe Biden is therefore “selling” the IRA a climate law, while the European Commission mainly detects protectionism.

With the law, US companies will also receive millions in tax cuts if they invest in sustainable jet fuel, wind farms, hydrogen, battery production, solar energy and other forms of sustainability. In total, Biden will allocate $ 369 billion for the law.

The European Commission mainly fears that the IRA will encourage companies to transfer production from the EU to the US, says Cats. According to Cats, European business is already in severe weather due to the energy crisis and the war in Ukraine, and prices in the USA are significantly lower than here. According to the European Union, the IRA is in violation of international trade rules.

European officials say they are concerned about “the way the financial incentives under the Act have been designed.” The IRA is a very big concern for Europe that labels the measures discriminatory, says Cats.

The matter has been discussed in a task force between the US and Europe for some time, but that is not going well at all. On 5 December, a kind of Summit will be held at which Europe wants to make its case to the Americans, but whether that offers solace is uncertain. Earlier, the Americans said that Europe should increase its subsidy to business. Additional problem is also that the law came about despite fierce Republican opposition, so Biden has little room to maneuver to change the law.

The law comes into force on 1 January, so Europe still has six weeks to formulate an answer. Brussels is now betting on the same privileged position as Canada and Mexico, but behind the scenes Brussels is already threatening higher import duties on American products.

The author: Michel THEYS

Michel Theys, a Belgian native, began his career as a civil servant, serving the public for several decades. After retirement, he shifted gears to follow his passion for journalism. With a background in public administration, Theys brought a unique perspective to his reporting. His insightful articles, covering a wide array of topics, swiftly gained recognition. Today, Michel Theys is a respected journalist known for his balanced and thoughtful reporting in the Belgian media landscape.

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