The Chinese Commerce Ministry has filed a complaint against the U.S. with the World Trade Organization, accusing the country of implementing discriminatory requirements for electric vehicle subsidies. Under a new U.S. rule that took effect on January 1st, electric car buyers are no longer eligible for tax credits of $3,750 to $7,500 if critical minerals or battery components were made by Chinese, Russian, North Korean, or Iranian companies. These tax credits are part of President Joe Biden’s climate legislation known as the 2022 Inflation Reduction Act.
The Chinese government did not specify what prompted the complaint but criticized the U.S. for enacting discriminatory subsidy policies for new energy vehicles under the act. The statement argued that these policies unfairly excluded Chinese products and distorted fair competition in the global market for new energy vehicles. Members of the WTO can file complaints about trade practices of other members and seek relief through a dispute settlement process.
The impact of this case is uncertain as the functioning of WTO’s Appellate Body has been blocked since late 2019 by the U.S., China’s dominant player in batteries for electric vehicles has a rapidly expanding auto industry with strengths in electric vehicles and battery technology. The European Union has also launched its own investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry.
The new U.S rule means that only 13 out of over 50 electric vehicles on sale in the U.S are eligible for tax credits, a decrease from about two dozen models in 2023. Automakers are working to source parts that would make their models eligible for the credits.
Overall, this development highlights ongoing tensions between China and the United States regarding trade practices and could have far-reaching implications for both countries and their respective industries.
In conclusion, China has filed a complaint against the U.S with WTO citing discriminatory requirements for electric vehicle subsidies under President Biden’s climate legislation known as Inflation Reduction Act 2022 . This move could lead to further trade tensions between China and US as well as impact automakers globally who rely on these subsidies to compete in markets worldwide
