The shadow of an imminent trade war over green subsidies is looming large at a high-level EU-US summit taking place on Monday.
Two vice presidents of the European Commission – Margrethe Vestager and Valdis Dombrovskis – are meeting at the University of Maryland with their US counterparts to discuss and deepen cooperation on economic matters of common interest.
The format, known as Trade and Technology Council (TTC), was launched last year to reset transatlantic relations after the fraught Trump years, which saw both sides slapping commercial tariffs on each other.
Although not a main item on the official agenda, one contentious topic threatens to overshadow the whole occasion: the Inflation Reduction Act (IRA), a landmark piece of legislation spearheaded by the administration of US President Joe Biden that contains $369 billion worth of investments to fight climate change and speed up the deployment of green energy.
Among its provisions, the IRA features tax credits for electric vehicles – up to $7,500 for new purchases – that will only apply if the product is assembled in the US and the majority of components are sourced domestically or from a free trade partner.
Unlike Canada and Mexico, the EU doesn't have a free trade deal with the US, which means EU-made cars will be automatically excluded from the generous subsidies.
Solar panels, batteries, heat pumps, biomass stoves, sustainable fuels and clean hydrogen will also be eligible for some form of tax credit under the IRA.
This has led a growing choir of EU leaders to blast the legislation as a blatant protectionist tool to promote American cars to the detriment of the European industry.
"There is a striking symmetry between the Inflation Reduction Act and the European
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