China’s WTO Complaint Against U.S. Throws New Twist in Electric Vehicle Industry Conflicts

China set to oppose Biden administration’s electric vehicle strategies at the World Trade Organization

In a significant blow to the electric vehicle industry, China has filed a complaint against the United States with the World Trade Organization. The Chinese Commerce Ministry did not specify what prompted the complaint, but it criticized the U.S. for implementing discriminatory subsidy policies for new energy vehicles under President Joe Biden’s 2022 Inflation Reduction Act. According to the statement, these policies excluded Chinese products and distorted fair competition, disrupting the global supply chain for new energy vehicles.

The impact of the case is uncertain, as the functioning of the WTO’s Appellate Body has been blocked since late 2019 by the U.S., making it challenging to resolve disputes between countries. The European Union has also launched its own investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry.

Under a new U.S. rule that went into effect on January 1st, electric car buyers are ineligible for tax credits of $3,750 to $7,500 if critical minerals or battery components were made by Chinese, Russian, North Korean or Iranian companies. This rule has affected over 50 electric vehicles on sale in the U.S., with only 13 models now eligible for tax credits – a decrease from about two dozen models in 2023. Automakers are working hard to source parts that would make their models eligible for these credits as they try to keep up with growing demand for electric vehicles worldwide.

China’s dominance in batteries for electric vehicles is undeniable, and its rapidly expanding auto industry has strengths in electric vehicles and battery technology. With this new policy in place, it’s clear that there will be challenges ahead as countries vie for market share in this fast-growing industry.

In conclusion, China’s complaint against the United States highlights ongoing tensions between nations regarding trade practices and subsidies for new energy vehicles under President Biden’s climate legislation. The uncertainty surrounding WTO dispute resolution and automakers’ efforts to source parts that meet eligibility criteria have created challenges in this rapidly growing industry as countries compete to lead innovation and meet growing demand worldwide.

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