Emmanuel Macron

Europe threatens retaliation over Inflation Reduction Act

Jacques Paquier, CC BY 2.0 , via Wikimedia Commons

French President Emmanuel Macron and German Chancellor Olaf Scholz want Europe to negotiate with the United States regarding the Inflation Reduction Act and have threatened retaliation otherwise.

The Inflation Reduction Act (IRA) has again attracted the ire of European leaders. In the most recent report on the subject from Politico, France and Germany have threatened retaliation from the EU over the “discriminatory” act. However, it is unclear if Biden is willing to make changes to the act following its successful attraction of businesses to the U.S.

Since the IRA was passed earlier this year, its requirements regarding how electric vehicle manufacturers can qualify for federal incentives have been harshly criticized. Specifically, the policy requires U.S. assembly of the vehicle and will eventually require certain materials to be domestically sourced in order to qualify. One of the first to issue a statement regarding the act was Hyundai (which lacks U.S.-based EV manufacturing) and the South Korean government. They have recently been joined by the EU, whose concern is now echoed by France and Germany.

The recent complaints coming from Europe regarding the act come after the French and German leaders met in Champagne, France, earlier this week. According to Politico, the message from the meeting is “if the U.S. doesn’t scale back, then the EU will have to strike back.”

It remains unclear how the EU would retaliate against the Inflation Reduction Act; however, as noted by Politico, the EU has long been considering a policy that would incentivize European-made products to be sold within their borders.

The reaction from the Biden Administration has been muted. Just today, the President was preoccupied with heading to Syracuse, New York, where a new computer chip manufacturing location is expected to enter construction in the coming year. No doubt, a facility that was incentivized to come to the U.S. by the President’s policy.

This nods to the question that the U.S. will eventually have to face. President Biden has now been approached by countless world leaders looking to negotiate regarding the IRA. Will he be willing to negotiate, or will he attempt to do battle to maintain the manufacturing jobs and businesses he has attracted to the U.S.?

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Europe threatens retaliation over Inflation Reduction Act
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