The European Union on Monday threatened retaliation against the US over subsidies for electric cars that favor domestic manufacturers.
The 27-nation bloc is angered by Washington’s Inflation Reduction Act, which envisages huge spending on green energy initiatives and includes tax breaks for US-made electric cars and batteries.
According to Brussels, these advantages for American electric vehicle manufacturers would put e-cars manufactured in the EU at an unfair disadvantage in the lucrative US domestic market.
The Inflation Reduction Act opens up a $7,500 tax credit for buying an electric car, but the vehicle must run on locally made batteries from a US factory.
Internal Market Commissioner Thierry Breton threatened “retaliation” against the United States because the subsidies “violated World Trade Organization rules”.
If Washington does not take into account the views of its EU partners, the bloc can “go to the WTO” and present its arguments there, he told French radio and TV station BFM Business.
French Finance Minister Bruno Le Maire called for a “coordinated, united and strong” response from EU countries against the US measures.
“Some large foreign companies that wanted to come to Europe are now hesitating and considering between European and American locations,” Le Maire said in an interview with French daily Les Echos, German Handelsblatt, Spain’s El Mundo and Italy’s Corriere della Sera .
He said the French government’s preliminary estimates suggest 10 billion euros in investments are at stake.
Last week, the EU asked the United States to give them the same exemptions as cars built in Canada and Mexico.
Brussels and Washington have set up a task force to work out a solution.
The US loans have made Europe’s manufacturing powerhouse Germany particularly nervous, worried about its key auto industry.
Chancellor Olaf Scholz warned last month that the US measures could trigger “a huge tariff war”.
© Agence France-Presse