Brussels has asked the US to treat imports of electric vehicles (EVs), batteries and sustainable energy equipment made by EU firms the same as those from Canada and Mexico.

Czech trade minister Jozef Sikela said that there was a willingness on both sides for a deal over tax credits that are applied to US-made EVs, which the EU says disadvantages its own exporters in the US market.

European trade ministers raised the issue with US trade representative Katherine Tai in Prague yesterday (01 November), reports Reuters.

‘Unacceptable’ deal

Sikela, said there was no deadline for the talks but the current situation was unacceptable for Europe.

“I will be pretty frank. I think in the form it was presented, I think for the EU it is unacceptable. And we simply expect we will get the same status as Canada and Mexico,” he said.

The EU wants the US to reverse course on the market-distorting measures which were bought into force by the Inflation Reduction Act, such as those encouraging consumers to ‘Buy American’ EVs.

Under the new act, EVs are required to be assembled in North America to qualify for an $7,500 tax credit.

Reduced imports

This has reduced the number of EV models that qualify for the tax break from 60 to 18 and excluded imports from the EU, South Korea and Japan.

The new law also contains domestic content requirements, including for critical minerals and battery components, which will enter force next year.

Both US and foreign car makers have raised concerns about the deadline for these requirements.

Retaliation threat

The US plan has caused worry in Germany, which is concerned for its key car industry, reports Barrons.

Chancellor Olaf Scholz warned earlier this month that US climate protection plans shielding domestic companies from foreign competition could trigger “a huge tariff war”.

Last week, Scholz and French president Emmanuel Macron agreed that the EU might have to resort to implementing protectionist measures to safeguard its own industries.

Sweden’s new trade minister, Johan Forssell, told Politico: “there are some elements in the Inflation Reduction Act that are worrying and they are not in accordance with World Trade Organization rules”.

Meetings

Despite the row, European Commissioner Valdis Dombrovskis welcomed what he viewed as increased support from the US for multilateral trade agreements.

“Now, as we deal with a more fragmented global order, these agreements gain geopolitical importance too,” he told a press conference.

Tai met with Dombrovskis, who is responsible for EU trade, ahead of the ministerial meeting, and committed to pursuing a global arrangement with the EU on carbon intensity and overcapacity in the steel and aluminium industries.

A transatlantic joint taskforce has also been established to try and resolve the issue of tax credits on EVs through dialogue.