Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Biden admin bows slightly to European pressure in trade clash

Biden admin bows slightly to European pressure in trade clash

The new electric vehicle tax credit provision in the Inflation Reduction Act has heightened trade tensions between the U.S. and other auto-producing countries.
The Biden administration on Thursday signaled some flexibility in how it would implement a revised tax credit for electric vehicles in the new Inflation Reduction Act that has rankled the European Union and other trading partners.

The Treasury Department, in a new “white paper” published Thursday, indicated it would adopt an expansive definition of which countries have a “free trade agreement” with the United States. That could help some overseas automakers qualify for at least a portion of the credit that favors U.S. manufactured vehicles.

The department also issued guidance for a separate tax credit for clean commercial vehicles which isn’t as stringent as the one for new consumer car sales. That could provide some opportunities for overseas manufacturers through dealerships that lease cars to consumers.

The EU welcomed that move, calling it “a win-win” for both sides. “U.S. taxpayers will be able to take advantage of highly efficient EU-made electric vehicles and components, while EU companies that provide their customers through leases with cutting-edge clean vehicles can benefit from the incentives,” the EU said in a statement.
However, the EU said it still had

concerns about the main electric vehicle tax credit contained in the Inflation Reduction Act, which requires final assembly of the cars to take place in the United States, Canada or Mexico. That makes many imported automobiles ineligible for the full $7,500 tax credit consumers can get on the purchase of a new electric vehicle. Treasury will propose a more detailed rule on the tax credit in March, missing an end-of-year deadline set by Congress in the IRA.

The law and its new electric vehicle tax credit provision have heightened trade tensions between the United States and other leading auto-producing countries such as France, Germany, South Korea and Japan. European leaders, in particular, have publicly raised concerns with President Joe Biden that the tax credit and other IRA provisions that subsidize U.S. clean energy could be the death knell for European industry as investment is siphoned away to the United States. Congressional lawmakers have been unapologetic, saying they crafted the law to boost U.S. jobs and production of electric vehicles.

“Discriminating against EU produced clean vehicles and inputs violates international trade law and unfairly disadvantages EU companies on the US market, reduces the choices available to US consumers and ultimately reduces the climate effectiveness of this green subsidy,” the EU said in its statement on Thursday, while welcoming Treasury’s announcement that it would take more time to work out many of the remaining details.

A spokesperson for the White House National Security Council indicated they did not expect the latest Treasury Department communication to put the matter to rest.

“We are committed to continuing to understand our partners’ concerns, including through the U.S.-EU Task Force on the Inflation Reduction Act, chaired by senior officials from the White House and European Commission, and through bilateral channels with our other partners, including the ROK and Japan. These are regular conversations and we expect conversations to continue,” the NSC spokesperson said.

Treasury released a preliminary list of which vehicles qualify for the credit on Thursday, and expects it to grow in coming days as they hear from more manufacturers. That still could be shorter than the list of cars the Energy Department has previously said are eligible for the credit.

Treasury also published answers to a list of “Frequently Asked Questions” about the new tax credit to help manufacturers and consumers sort through the complexities. Neither the EU nor Autos Drive America, a group representing foreign brand manufacturers, immediately responded to a request for comment on Thursday.

Sen. Joe Manchin (D-W.V.), who played a key role in crafting the final version of the tax credits that Biden signed into law, criticized the Treasury Department’s move and urged officials to pause implementation. Treasury’s interpretation “bends to the desires of the companies looking for loopholes and is clearly inconsistent with the intent of the law,” he said.

Why countries are concerned: The Inflation Reduction Act, which Biden signed into law on Aug 16, immediately required electric vehicles to be assembled in North America to qualify for the $7,500 consumer tax credit.

Previously, EVs assembled outside North America could qualify for the credit, although each automaker was limited to a cap of 200,000 vehicles before they maxed out.

The new North American assembly requirement eliminated many electric vehicles made overseas that previously qualified, angering the EU, Japan and South Korea and raising the prospect of a legal challenge at the World Trade Organization.

The EU, which is home to big automakers like Volkswagen, BMW and Mercedes-Benz, has been concerned the EV tax credit will siphon investment away from Europe in favor of the United States. However, South Korea has an opposite concern.

Its biggest car company, Hyundai, has already announced plans to build a $5.5 billion electric vehicle facility in Georgia that won’t become operational until 2025.

The South Korean automaker has asked Treasury for a grace period so it can continue importing cars that qualify for the credit until the Georgia facility starts production. However, Treasury’s white paper does not address that issue, potentially leaving the automaker out in the cold. A spokesperson for Hyundai said the company is still reviewing Treasury’s latest statements.

Important battery provisions: The guidance released Thursday provides more hope for foreign producers of electric vehicle batteries. The IRA introduced separate requirements effective on Jan. 1 for critical minerals and other battery components that Congress intended to spur more production in the United States. Additional provision that take effect in 2024 also would would prevent cars containing material and parts from China from being eligible for the tax credit.

To qualify for a portion of the tax credit, 40 percent of the value of the critical minerals in the battery must be extracted or processed in the United States or in any country with which the United States has a free trade agreement. That level increases to 80 percent by 2027. The critical minerals could also be recycled in North America to qualify.

The U.S. currently has formal free trade agreements with 20 countries, including Canada, Mexico, South Korea and other countries in Asia, Latin America, Africa and the Middle East.

Treasury noted that the term “free trade agreement” is not defined in the IRA or any other statute, enabling the department to come up with its own definition. This could potentially broaden the group of countries eligible for the tax credit, including the European Union which does not have a formal trade deal with the U.S.

Treasury said it would identify a list of criteria for what qualifies as a free trade agreement with the United States in a notice of proposed rulemaking it plans to issue in March.

Treasury and the IRS “also expect to propose that the Secretary may identify additional free trade agreements for purposes of the critical minerals requirement going forward and will evaluate any newly negotiated agreements for proposed inclusion during the pendency of the rulemaking process or inclusion after finalization of the rulemaking.”

The EU, in its statement, indicated it hoped to work out a solution with the Biden administration that would allow it to be treated “the same way” as all U.S. free trade agreement partners.

To qualify for the another portion of the tax credit, at least 50 percent of the vehicle’s battery components have to be manufactured or assembled in North America, starting in 2023. That requirement increases to 100 percent by 2029.

IRA did not provide any leeway for components manufactured or assembled in free trade agreement countries, like it did for the critical minerals content requirement.

Commercial vehicle tax credits: Taxpayers that buy electric or other clean vehicles for their business operations can also apply for a separate tax credit that has less stringent criteria than the ones for the cars sold directly to consumers.

That potentially could provide a sizable market for overseas manufacturers who want to work with dealers to lease electric vehicles in the United States. However, companies have to take care that the lease does not contain terms that would prompt the IRS to recharacterize it as a sale, Treasury said.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
×