The United States has been accused of discriminatory practices by China in relation to electric vehicle subsidies. This complaint was lodged with the World Trade Organization (WTO) by the Chinese Commerce Ministry, who cited that the new U.S. rule implemented on January 1, 2023, has discriminatory requirements for tax credits for electric car buyers. Under this rule, buyers who purchase electric cars made with certain battery components from companies based in China, Russia, North Korea, or Iran are not eligible for tax credits ranging from $3,750 to $7,500. These tax credits are part of President Biden’s 2022 Inflation Reduction Act aimed at reducing carbon emissions and addressing climate change.
China has accused the U.S. of developing discriminatory subsidy policies for new energy vehicles under the act, which excludes Chinese products. This move is seen as unfair competition and disrupting the global supply chain for electric vehicles. The WTO allows member countries to file complaints regarding trade practices and seek resolution through a dispute settlement process. However, the outcome of this case remains uncertain due to the fact that the WTO’s Appellate Body has not been functional since 2019 due to U.S blocking the appointment of new judges.
The European Union has also expressed concern about Chinese subsidies for electric vehicles by launching an investigation into them. China is a major player in electric vehicle batteries and technology and has been rapidly expanding its auto industry, posing a potential threat to established carmakers worldwide. With the new U.S rule limiting eligibility for tax credits to only a few EV models, automakers have had to source components to meet these requirements which led to a decrease in eligible EV models in the US market causing concerns within industry about maintaining competitiveness and accessing subsidies.
In conclusion, this complaint filed by China against the United States highlights how trade practices can disrupt fair competition and affect global supply chains in industries like electric vehicles manufacturing where China is playing an increasingly important role due to its rapid expansion in this sector while established players are trying to maintain their competitiveness in this changing landscape of automotive industry
