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

China and EU Challenge U.S.’s New Electric Vehicle Subsidy Policy at WTO; Uncertain Future for Dispute Settlement Process Amid Blocked Appellate Body.

The Chinese Commerce Ministry has filed a complaint against the U.S. with the World Trade Organization, alleging that new U.S. rule on electric vehicle subsidies is discriminatory towards Chinese products. Under this rule, 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. These tax credits are part of President Joe Biden’s climate legislation known as the 2022 Inflation Reduction Act.

The impact of the case is uncertain due to the WTO’s Appellate Body being blocked since late 2019 by the U.S., making it difficult for members to file complaints and seek relief through a dispute settlement process. Despite this, China’s rapidly expanding auto industry has strengths in electric vehicles and battery technology, making it a dominant player in batteries for electric vehicles.

In addition to China’s complaint, the European Union has also launched its own investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry. The new U.S rule has only made 13 out of over 50 electric vehicles on sale in the U.S eligible for tax credits, a decrease from about two dozen models in 2023. Automakers are working to source parts that would make their models eligible for the credits.

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