Market"Super Aggressive"? Dispute over US billions

“Super Aggressive”? Dispute over US billions

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$370 billion for climate protection and renewable energies – sounds good but perceived as “super aggressive” in Europe: the US subsidy package. That’s the point.


The largest global warming investment in US history: a $370 billion climate protection and energy security package. For the sake of popularity, everything works under the name of “Inflation Reduction Act”. However, it triggers considerable resentment in Europe. French President Macron warned during his US visit that the package was “overly aggressive” against European companies. What is this about:

What exactly is the Inflation Reduction Law?

The package aims to revive the industry. First of all, it concerns large investments in climate protection, as well as in the health sector. Its total volume is approximately $430 billion (about €414 billion), of which $370 billion is earmarked for climate protection and energy security.

The package will be counter-financed, among other things, through higher taxes for large companies and the strengthening of tax authorities. The expected additional income should also reduce the budget deficit and therefore inflation – hence the name of the law, which is also politically favorable due to high consumer prices.

What subsidies does the law include?

The package favors domestic industry over foreign competitors. Subsidies and tax credits are linked to companies that use US products or manufacture them themselves in the US.

Tax cuts are planned for companies investing in clean energy, among other things. There are subsidies for electric cars, batteries and renewable energy projects made in the USA. For example, the purchase of a “Made in the USA” electric car with a battery also made in the USA is subsidized at $7,500. Subsidies also go to manufacturers of wind turbines or solar systems using US steel. In light of such measures, electric car maker Tesla has announced that it will reconsider its plans to build a battery factory in Brandenburg, Grünheide.

How do Europeans react?

They accuse Washington of trade protectionism and discrimination against European companies and fear EU companies emigration to the US. Internal Market Commissioner Thierry Breton threatened to appear before the World Trade Organization (WTO). “These decisions will divide the West,” Macron warned during his visit to Washington. France already supports a “European Procurement Act” as an alternative.

Economy Minister Robert Habeck also promises possible “robust countermeasures” by the EU. In the event of a conflict, European production shares could be stipulated and public procurement could focus more on European production. But politicians such as Federal Finance Minister Christian Lindner are warning of a “trade war.”

What changes are possible?

The EU and the US have already set up a working group to resolve the dispute. “We are trying to reach an amicable agreement,” says government spokesman Steffen Hebestreit. France hopes for derogations for certain EU industries, as the US has already provided to Mexico and Canada. Meanwhile, the White House has confirmed that EU rivals will not be excluded from the US market and that ongoing negotiations will be “very constructive”.

But it seems unlikely that President Joe Biden will make any big changes. The promotion of US industry is popular in the country. Subsidies help auto industry-linked states like Ohio and Michigan. And they play an important role in US elections. Even if Biden wants to accommodate Europeans, his room for maneuver is limited. The subsidies are guaranteed by law, and until January, the President will no longer have a majority in Congress.

Source: ZDF

Ben
Ben
I am Ben Stock, a highly experienced professional with over 7 years of experience in the news industry. I specialize in market section writing and have published numerous high-quality articles on various topics under my name. My passion for journalism has helped me to develop an in-depth understanding of the industry, enabling me to stay up-to-date on all the latest trends and developments.

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