Global Trade Tensions Escalate: China Complains Against US Electric Vehicle Subsidy Policies at WTO

China set to oppose Biden administration’s electric vehicle strategies at the World Trade Organization

The Chinese Commerce Ministry has lodged a complaint with the World Trade Organization (WTO) against the United States, accusing it of discriminatory requirements for electric vehicle subsidies. The new U.S. rule that took effect on January 1 states that electric car buyers are not eligible for tax credits of $3,750 to $7,500 if critical minerals or battery components were made by Chinese, Russian, North Korean, or Iranian companies. These tax credits form part of President Joe Biden’s climate legislation known as the 2022 Inflation Reduction Act.

The Chinese government did not specify what prompted the complaint but criticized the U.S. for implementing discriminatory subsidy policies for new energy vehicles under the act. The statement noted that these policies excluded Chinese products and distorted fair competition in the global market for electric vehicles, disrupting the global supply chain. Members of the WTO can file complaints about trade practices of other members and seek relief through a dispute settlement process.

The impact of this case is uncertain as the functioning of WTO’s Appellate Body has been blocked since late 2019 by China and the United States. China, a dominant player in batteries for electric vehicles, has a rapidly expanding auto industry with strengths in electric vehicles and battery technology. The European Union has also launched its own investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry.

With the new U.S rule only 13 out of over 50 electric vehicles on sale in America are eligible for tax credits, a decrease from about two dozen models in 2023. Automakers are working hard to source parts that would make their models eligible for these credits as they work to compete in this fast-growing market segment.

In conclusion, China’s complaint against the United States highlights how trade tensions between these two countries continue to escalate and impact global markets and industries such as automotive manufacturing and renewable energy development

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