According to the Financial Times, European Union (EU) Trade Commissioner Valdis Dombrovskis reportedly cautioned that green energy subsidies in the Democrats’ massive climate expenditure measure might harm EU sectors and force enterprises to trade more with China.
The $369 billion measure provides substantial subsidies to encourage home manufacture of green energy technology, reducing the country’s reliance on China and other foreign nations for items such as solar panels and electric vehicles.
Dombrovskis, on the other hand, believes that the “Inflation Reduction Act” (IRA) may act against its claimed goals since the subsidies would make European exports significantly less competitive in comparison to US goods, making Chinese commercial partnerships more enticing to EU firms.
Dombrovskis also stated that the EU might respond to US subsidies by boosting or introducing new green energy subsidies.
The commissioner emphasized that he does not want to create a trade war between the United States and the European Union, implying that any strong move by the EU will be faced with a comparable response from the Biden administration.
China controls the extraction and refining of minerals used in the production of electric vehicles (EVs) and other green energy technologies such as solar panels.
The climate plan contains a $7,500 tax credit for electric vehicles provided they are constructed in North America and the minerals required to make them are obtained locally.
The tax incentive has enraged politicians in Germany, France, and the EU, who claim that it breaches pre-existing trade accords and harms European automakers.
[READ MORE: Trump Tax Returns Finally Released]