China Files Discrimination Complaint Against the US over Electric Vehicle Subsidies in New Rule

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

In a recent move, China has filed a complaint with the World Trade Organization against the United States, accusing it of discriminatory requirements for electric vehicle subsidies. The new rule that went into effect on January 1, 2023, has made electric car buyers 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. These tax credits are part of President Joe Biden’s climate legislation known as the 2022 Inflation Reduction Act.

The Chinese Commerce Ministry did not specify what led to the complaint but criticized the United States for formulating discriminatory subsidy policies for new energy vehicles under the act. The statement stated that these policies excluded Chinese products and distorted fair competition in the global market. Members of the WTO have the power to file complaints about trade practices of other members and seek relief through a dispute settlement process.

The impact of this case is uncertain as the functioning of WTO’s Appellate Body has been blocked since late 2019 by the US and China. China is a dominant player in batteries for electric vehicles and has an expanding auto industry with strengths in electric vehicles and battery technology. The European Union has also launched its investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry.

With the new US rule, only 13 out of over 50 electric vehicles on sale in the US are eligible for tax credits, down from around two dozen models in 2023. Automakers are working hard to source parts that would make their models eligible for these credits.

Leave a Reply