China Files Complaint Against U.S. Over Discriminatory Electric Vehicle Subsidy Rule

China to oppose Biden’s electric vehicle initiatives at the WTO

The Chinese Commerce Ministry has filed a complaint with the World Trade Organization against the United States, alleging that new U.S. rules regarding electric vehicle subsidies are discriminatory. The complaint comes in response to a rule that went into effect on January 1, which states that electric car buyers are not eligible for tax credits if critical minerals or other battery components were made by Chinese, Russian, North Korean, or Iranian companies. These tax credits are part of President Joe Biden’s 2022 Inflation Reduction Act, aimed at addressing climate change.

The real-world impact of the case is uncertain due to the WTO’s Appellate Body not functioning since late 2019. If the United States were to lose and appeal the ruling, China’s case would likely not progress due to this technical issue. However, China is a dominant player in the battery market for electric vehicles and has a rapidly expanding auto industry that could challenge established carmakers globally. The European Union has also expressed concerns about Chinese subsidies for electric vehicles under similar rules. Under the new U.S. rule, only 13 out of over 50 EV models on sale in the U.S. were eligible for tax credits, prompting automakers to source eligible parts to qualify for the credits.

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