Cindy Yu Cindy Yu

Joe Biden puts America First on electric vehicles

The president’s green protectionism is freezing out his allies

(Credit: Getty images)

A trade war is brewing between the United States and its closest allies. When Thierry Breton, the EU’s internal markets commissioner, pulled out of a summit with US officials just before Christmas, he complained that the agenda ‘no longer gives sufficient space to issues of concern to many European industry ministers and businesses’. A few days before, Emmanuel Macron cornered senator Joe Manchin in Washington DC. ‘You’re hurting my country’, the French president told Manchin. The senator was given a similarly frosty reception at the World Economic Forum in Davos, where Germany’s Olaf Scholz and Luxembourg’s Xavier Bettel accosted him caustically.

The Europeans are upset about Joe Biden’s Inflation Reduction Act (IRA), written by Manchin’s office, which commits $370 billion (£300 billion) to clean energy projects based in North America. 

Quite how that reduces inflation is an open question. The IRA is the biggest green subsidy in US history, intended to bolster America’s eco-industries against China’s growing dominance by cutting Chinese firms out of various green supply chains. 

By trying to hollow out China’s renewables lead, the US is sucking production, investment and research out of friendly nations

In the process, however, the new Act has also cut out friendly nations which don’t have trade deals with Washington. The EU, South Korea, Japan and, lately, the UK all furiously complaining that the legislation violates the spirit of free trade between nations. Their barely concealed suspicion is that they’re being written off as collateral damage in the ongoing trade hostilities between Beijing and Washington; that, when it really matters, president Biden is just as happy as his predecessor to put America first. 

For these countries, the biggest sticking point in the IRA is the multi-billion dollar carve out for the electric car industry. Between 2010 and 2020, a quarter of the world’s EVs were made in the EU and only 18 per cent in the US.

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