June 13, 2024

China Files Complaint against US for Discriminatory Electric Vehicle Subsidy Policies at WTO

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

The Chinese Commerce Ministry has filed a complaint with the World Trade Organization against the United States, accusing the country of implementing discriminatory requirements for electric vehicle subsidies. Under a new U.S. rule that took effect on January 1st, electric car buyers are no longer eligible 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 Chinese government did not specify what prompted the complaint but criticized the United States for its discriminatory subsidy policies towards new energy vehicles under the act. The statement noted that these policies excluded Chinese products and distorted fair competition in the global market for electric vehicles. Members of the WTO can file complaints about trade practices of other members and seek relief through a dispute settlement process.

The impact of this case is uncertain as the functioning of WTO’s Appellate Body has been blocked since late 2019 by the United States. China is a dominant player in batteries for electric vehicles and has a rapidly expanding auto industry with strengths in electric vehicles and battery technology. The European Union has also launched its own investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry.

As a result of this new U.S rule only 13 out of over 50 electric vehicles on sale in the U.S are eligible for tax credits, which is a decrease from about two dozen models in 2023. Automakers are working to source parts that would make their models eligible for these credits to continue competing in the marketplace.

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