Japan Enters Inflation Reduction Act Dispute

Japan is the latest US ally to wade into a multinational standoff with Washington over the tax credit provisions within the US Congress-passed Inflation Reduction Act.

• Tokyo warned in a statement over the weekend that EV tax credits, could discourage Japanese investment in the United States: "It would be possible that Japanese automakers hesitate to make further investments towards electrification of vehicles. This could cause negative impacts on the expansion of investment and employment in the US."
• South Korea, France, Germany, and the EU have all expressed concerns with the legislation - France and Germany have threatened to enact protectionist legislation in response.
• French Finance Minister Bruno Le Maire said today: “We must clearly tell our US partners that it is a major problem for us. It is not acceptable. It could create a major shock on European industry.”
• If the level of international pushback from key US allies compels a watering-down of the flagship legislation it would be a major headache for the Biden administration - especially if Democrats lose control of Congress in January, and find their agenda stalled.