The United States has been hit with a complaint from China at the World Trade Organization (WTO) over discriminatory requirements for electric vehicle subsidies. This comes in response to a new rule that took effect on January 1, which states that electric car buyers are not eligible for tax credits ranging from $3,750 to $7,500 if certain battery components were made by companies from China, Russia, North Korea or Iran. These tax credits form part of President Joe Biden’s 2022 Inflation Reduction Act aimed at addressing climate change.
China did not provide any details about the reason behind the complaint but mentioned that the U.S. has developed discriminatory subsidy policies for new energy vehicles under the act, which excludes Chinese products. This move is seen as distorting fair competition and disrupting the global supply chain for electric vehicles. Member countries of the WTO can file complaints regarding trade practices and seek resolution through a dispute settlement process.
The outcome of this case remains uncertain as the WTO’s Appellate Body has not been functional since 2019 due to the U.S blocking the appointment of new judges. China, a major player in electric vehicle batteries and technology, has been rapidly expanding its auto industry and poses a potential challenge to established carmakers worldwide. The European Union has also expressed concern by launching an investigation into Chinese subsidies for electric vehicles.
This new U.S rule limits eligibility for tax credits to only a select few electric vehicles prompting automakers to source components from other countries in order to meet eligibility criteria. This has resulted in decreased availability of eligible EV models in the U.S market raising concerns within the industry about maintaining competitiveness and access to subsidies.
In conclusion, this complaint filed by China against the United States highlights growing tensions between two superpowers over trade practices and policies related to clean energy technology, particularly concerning electric vehicles subsidies that may disrupt fair competition and global supply chains for these technologies
