Summary: 

China complained against the U.S. Inflation Reduction Act to the World Trade Organization, claiming it was unfair and obstructed fair competition. President Biden signed the Inflation Reduction Act into law in August 2022. As a result, starting in 2024, American consumers who purchase automobiles with battery components from a “foreign entity of concern” will not be eligible for the $7,500 clean-vehicle tax credit. Any Chinese-based business, including U.S. subsidiaries, is included in the definition, as are businesses outside that have at least a 25% stake in state-backed Chinese organizations.

Context:

China complained to the World Trade Organization over the U.S. Inflation Reduction Act, claiming it to be unfair and biased against fair competition. President Biden signed the Inflation Reduction Act into law in August 2022, which prohibits American consumers from receiving a $7,500 clean-vehicle tax credit beginning in 2024 if they purchase vehicles with battery components from a “foreign entity of concern.” By 2025, the minerals used in battery components will also be covered by the policy. Industry participants viewed the action as a means of diminishing China’s influence in the supply chain of the American EV industry. Any Chinese-based business, including U.S. subsidiaries, is included in the definition, as are businesses outside that have at least a 25% stake in state-backed Chinese organizations. The regulations also cover North Korea, Iran, and Russia. The regulations are “under the disguise of responding to climate change,” according to China’s permanent mission to the WTO, but they are “in fact contingent upon the purchase and use of goods from the United States, or imported from certain particular regions.” Beijing has asked Washington to “promptly correct discriminatory industrial policies and maintain the stability of the global industrial and supply chains for new energy vehicles”. In February, 2024, citing Chinese technology as a possible threat to national security, President Joe Biden directed the U.S. Commerce Department to launch an investigation into foreign-made software in automobiles. The investigation may result in limitations on the usage of specific parts in American automobiles. China’s protest comes in the wake of other recent US-China disagreements, such as those involving tariffs and a US measure that would have separated the well-known social media app TikTok from its Chinese parent business over worries about national security. China surpassed Germany and Japan to become the world’s largest automobile exporter in 2023, and in the fourth quarter of 2023, Chinese electric vehicle manufacturer BYD surpassed Tesla to become the best-selling pure EV globally. 

Picture and Article Sources: The Wall Street Journal  & Voice of America