America's allies in Europe and Asia are livid at being cut out of U.S. tax credits for electric vehicles, Politico reported.
On Jan. 1, only electric vehicles assembled in North America will be eligible for rebates to consumers under President Joe Biden's Inflation Reduction Act.
Japan, Korea, and the European Union have urged Biden to cut back America-first manufacturing rules in the IRA, Politico noted. They argue foreign-made cars will face a disadvantage in the American market.
"We did it to help the United States of America," said Sen. Joe Manchin, D-W.Va., who agreed to back the legislation in August after the domestic manufacturing incentives were included.
Politico reported it is spiraling into a full-blown global trade conflict.
The dispute threatens to undo some of the strongest trading relationships for the U.S. And it comes at a time when the Biden administration is trying to make up the economic toll of Russia's war in Ukraine and China's technological rise, Politico said.
Under the law, the countries will be cut out of the U.S. $7,500 consumer tax credits. Those credits will only be given for vehicles built in North America with batteries sourced from the U.S. and its selected partners, according to Politico.
"I'd like to believe that it is a one-time incident rather than a turning point to deeper protectionism," a South Korean embassy official said. "But, unless redressed, it could cause the proliferation of harmful subsidies around the world."
Democrats appear reluctant to revise the law.
"There is nothing — and we reviewed it very carefully — in trade law that says the United States of America can't be taking steps to create good-paying jobs in America while it promotes [action on] climate change," said Sen. Ron Wyden, D-Ore.
Republicans had opposed the law, with some citing the tax credits as the reason.
"How can we hold other countries to account for their trade commitments if we don't fulfill our own?" said Rep. Adrian Smith, R-Neb., the ranking Republican on the Ways and Means Trade Subcommittee. "We must promote domestic manufacturing and strengthen supply chains without compromising relations with our trading partners."
Last month, EU trade ministers insisted they would be forced to respond if Washington stuck to all the terms of its Inflation Reduction Act, which they maintain will unfairly discriminate against its firms that want to compete for contracts, The Associated Press reported.
"Nobody wants to get into a tit-for-tat or subsidy race. But what the U.S. has done really isn't consistent with the principles of free trade and fair competition," Irish Trade Minister Leo Varadkar said.
Jeffrey Rodack ✉
Jeffrey Rodack, who has nearly a half century in news as a senior editor and city editor for national and local publications, has covered politics for Newsmax for nearly seven years.
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