Foreign Affairs

Biden Admin Won’t Offer EV Tax Breaks To European Firms…Yet: REPORT

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The Treasury Department will not offer tax breaks to European firms under the Inflation Reduction Act (IRA) in new guidance this week, but a potential trade deal could still grant them access to billions in subsidies offered by President Joe Biden’s signature climate legislation, Politico reported.

The Treasury Department is expected to issue new guidance regarding the implementation of the Inflation Reduction Act this week without any concessions to European allies, some of whom have criticized the law for “protectionist” requirements for electric vehicles and their batteries to be sourced and manufactured in America to qualify for tax credits, Politico reported, citing a senior administration official. However, a potential trade deal between the U.S. and European Union — which would still require vehicles to be manufactured in the U.S. — could open up European minerals, batteries and vehicles for U.S. subsidies.

Biden told us in his #SOTU to “Buy American,” but then created a work-around in the so-called “Inflation Reduction Act” so “Buy American” now includes Japan and the EU for our critical minerals? ¯\_(ツ)_/¯ pic.twitter.com/1c0Dya0hkf

— Sen. James Lankford (@SenatorLankford) March 23, 2023

American labor unions have criticized the negotiations between the U.S. and the E.U. on the grounds that a deal would result in fewer American jobs, according to Bloomberg. The White House has previously described the IRA as a way to “revitalize American manufacturing” with “target tax incentives aimed at manufacturing U.S.-sourced products such as batteries, solar and offshore wind components,” in an August fact sheet following the passage of the IRA.

E.U. diplomats and government figures have heavily criticized the IRA, and on March 16 Europe unveiled a pair of subsidy programs designed to encourage green manufacturing on the continent. The U.S. has at times appealed to maintaining a unified stance against China — decoupling U.S. supply lines from China was a key motivator for the IRA — as a reason Western powers should avoid fighting a trade war, according to Politico.

The department previously issued guidance in December that opened the door to potential subsidies for E.U. companies.