There’s nothing to liven things up like a good old transatlantic trade war, or at least some warlike words about trade. Throw in a global energy shock and a geopolitical clash of superpowers, and local requirements for tax credits for electric vehicles have never been such a crucible of conflict.In some of the more hot-headed quarters of the EU, the dispute with Washington has metastasised into resentment over US companies charging Europe higher energy prices, thus adding to European industry’s incentives to move to America. French president Emmanuel Macron will have a chance to make this point during his state visit to the US this week.
The energy price accusations are generally illogical or overblown, and the electric vehicle issue is reasonably easy to fix. The bigger issue is President Joe Biden’s Inflation Reduction Act, setting the US down a path of heavy subsidies that the EU will struggle to follow and which is imperfectly fenced in by weak trade law.
First, the idea of Washington consciously creating an energy cost differential with the EU that poaches European investment is a big stretch. The US doesn’t control its energy companies’ pricing, and it is hardly its fault that the EU left itself so dependent on piped Russian gas. There’s a dark irony here: in 2018, the EU gulled Donald Trump into dropping a plan to impose tariffs on European cars with specious promises of importing American liquefied natural gas. Had those pledges been real rather than tactical, Europe would now be in a better place.