Will Ferrell’s appearance in the General Motors 2021 Super Bowl ad was at best foreshadowing. The actor’s comedic rage at being “out-EV’d” by Norway touched on a fact that was a source of pride for Europe.
Due to a lack of investment and governmental support, the U.S. has lagged behind China and Europe in electric vehicle sales. The European Union and countries like South Korea view the Biden Administration’s revamped EV tax credit requirements in the $369 billion Inflation Reduction Act, as an “aggressive” competitive threat, Bloomberg news reports.
When asked about the tax credits, European commission spokeswoman Miriam Garcia said “We think that it’s discriminatory, that it’s discriminating against foreign producers in relation to U.S. producers.”
The U.S. has come a long way since Trump threatened to impose taxes on European cars, and the conflict in Ukraine has brought NATO allies closer together. But a new era of multilateralism under Biden is still a ways off.
Even if it’s good for the environment, a subsidy salvo meant to hold China and encourage the construction of new factories in the U.S. is bad for trading partners caught in the middle. Protectionism that combines “Buy American” clauses with subsidies, which manufacturers claim results in a 30% cost reduction, “seems like a dark new era.”
However, there are dangers. The first increases trade tensions. According to Bloomberg News, Europe’s most recent plan to further relax rules on state aid in retaliation to the US will result in several internal disputes over unfair competition between powerful nations like Germany and those with less financial power.
Another is wasting money. Locally made raw materials or components are currently in great demand due to their ease of transportation and lack of geopolitical risk. Yet, there have been times of oversupply in the semiconductor industry where shortages once existed. As a result, Europe should be cautious even as it rushes to fulfill its own industrial goals.
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