Europeans and Americans are still at trade war, and Biden admin has made it worse

After somewhat colder years, the ties between the United States and the European Union under the leadership of President Joe Biden have been tightened again. Nevertheless, a cold wind has risen now. The EU is angry about how the US is pouring hundreds of billions of public money into green industries. Today and tomorrow, EU countries are discussing plans to strike back. This is going on.

The source of discontent is a US law called the Inflation Reduction Act (IRA). The law should curb the rapidly rising prices in the country, but that package also includes 369 billion dollars in ‘green subsidies’.

This smack money is intended, for example, to encourage Americans to buy an electric car. They can get a tax advantage of over 7,000 euros on that car, provided it is built in the USA.

This leads to anger in Europe, because this gives priority to American things. It is becoming more attractive for Americans to buy ‘American’. It could be a reason for companies to grab their piping and move their production to the US.

The EU states that this is not allowed: trade rules dictate that all products should be treated equally, regardless of where they are made. The European anger about this has not yet led to a change of course.

And so the EU is now forging plans to strike back. Brussels proposes, among other things, to relax the state aid rules for ‘green industries’. This immediately leads to confusion within the EU, because richer countries have more money to distribute. That could therefore lead to a competitive advantage for Germany, for example.

In the longer term, the commission also wants to create a new pot of money to accelerate the digital and green transition.

As always, a new European pot of money leads to hassle again. Of course, such a pot has to be filled and that leads to questions like: Where does the money come from? And who pays for it? For example, there are votes to jointly borrow for this and thus incur debts together.