Dispute Between the European Union and the United States over the US Inflation Reduction Act

Abstract

A component of the transatlantic community, in addition to political and security aspects, are also economic and trade issues, which have recently become the cause of a growing dispute between the US and the European Union. At the root of the current tensions is the US Inflation Reduction Act, adopted in 2022, which provides for tax breaks and the granting of benefits/subsidies to US companies with green production investing in the US. In Europe, this was considered to be protectionist and unfair competition. Germany and France felt the most threatened. In response to the Biden administration’s actions, there were also suggestions on the EU side to subsidize its own industry, which – in violation of free trade principles – could actually lead to a “subsidy war”. Trade talks were also held in which the EU hoped that the US would take its concerns into account. Despite the declared willingness to negotiate on both sides, no agreement could be reached.