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The EU Says the Proposed U.S. EV Tax Credits are Biased Against Foreign Companies

The European Union is claiming that the latest EV tax credits in the U.S. would exclude foreign car producers unfairly. The EU says its members are “deeply concerned” about the domestic sourcing and production requirements in the proposed Inflation Reduction Act, according to Reuters.

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Union officials say it’s unfair that American automakers wouldn’t be able to take advantage of the latest electric vehicle tax credits if they were American. According to Reuters, the European Union has expressed “deep concern” over the proposed Inflation Reduction Act’s mandates for domestic sourcing and production.

Even worse, the EU claims that if the new EV tax credits are passed and signed into law, the United States would violate World Trade Organization rules. It appears that the proposed tax credits have angered more than just U.S. automakers due to the stringent eligibility rules based on the country of origin of battery components and the country of assembly of the EVs.

Electric vehicles (EVs) powered by batteries made primarily of metals mined and processed in the United States and North American Union would be eligible for the new tax credits. By 2029, all battery components must be manufactured in the United States, up from a starting point of 50% in 2024. Those electric vehicles that meet the criteria would be entitled to the maximum $7,500 federal subsidy.

However, in 2023, electric vehicles that use Chinese battery components would no longer qualify, making many presently available EV models ineligible for the tax credits.

Even American automakers like Tesla and GM still rely heavily on China’s metals processing capabilities. Now, EU officials are on board with automakers’ calls for a change in EV tax credits, saying, “We think it’s discriminatory, that it is discriminating against foreign producers in relation to U.S. producers.” Naturally, this would be in conflict with the World Trade Organization […] we need to make sure that any new measures are equitable and… nondiscriminatory. Therefore, we continue to urge the United States to eliminate the bill’s discriminatory provisions and bring it into compliance with WTO standards.

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The European Union has a problem with the credits because they give preference to electric vehicles made in the country of origin rather than those made abroad. It’s understandable that the international coalition would be upset by the proposed changes, but that’s the point, right?

The House of Representatives has not yet voted on the Inflation Reduction Act, which was passed by the Senate on Sunday. If it passes the Senate, all President Joe Biden would have to do is sign it into law.