Trade Dispute Looms Over "Buy American" Legislation

One of the Biden administration’s flagship pieces of legislation, the Inflation Reduction Act, could lead to a souring of relations with key allies in Europe and Asia.

• The IRA provides federal incentives to automotive manufacturers to encourage the US electric vehicle industry, providing vehicles are assembled in the US.
• French President Emmanuel Macron and German Chancellor Olaf Scholz met last week to discuss what they see as “market-distorting” legislation and pledged to strike back with their own protectionist policies if Washington followed through with IRA incentives.
• Macron said, “we need a Buy European Act like the Americans, we need to reserve [our subsidies] for our European manufacturers.”
• Macron continued: “You have China that is protecting its industry, the U.S. that is protecting its industry and Europe that is an open house."
• EU trade chief Valdis Dombrovskis said that “it will not be easy to fix" differences after a meeting with US Trade Rep Katherine Tai in Prague today.
• Sweden’s trade minister Johan Forssell, said that aspects of the U.S. legislation were “worrying” and “not in accordance with [World Trade Organization] rules."
• Czech Trade Minister Jozef Síkela said the [IRA] is “unacceptable,” and “is extremely protective against exports from Europe.”