Germany and France have reportedly agreed that the European Union will retaliate against the US if it goes ahead with planned tax cuts and subsidies in the Inflation Reduction Act, which seeks to encourage companies to shift production to the US. This was reported by the European edition of the news website Politico on Thursday.
The German Chancellor Olaf Scholz and French President Emmanuel Macron want to reach an agreement with the United States on the implementation of the Inflation Reduction Act.
Scholz and Macron, who met in Paris, said that if the US persists in implementing the law in its current form, the EU “will have to strike back.”
Politico said the move could provoke a “transatlantic trade war.”
Paris and Berlin reportedly agreed to propose similar EU-wide incentive schemes for businesses.
In an interview with TV channel France 2 on Wednesday night, Macron, referring to state subsidies for electric cars, called for a “Buy European Act like the Americans,” adding that the EU should “reserve [our subsidies] for our European manufacturers.”
“[Scholz and I] have a real convergence to move forward on the topic, we had a very good conversation,” Macron added.
On Sept. 10, European Commission deputy head Valdis Dombrovskis told Bloomberg that the EU was assessing the measures set out in the US Inflation Reduction Act for possible violations of World Trade Organization requirements.
For now, Germany and France have signalled they would prefer to reach a compromise with the US. This should be done via the ‘EU-US Taskforce on the Inflation Reduction Act’ that was created on Tuesday during a meeting between European Commission President Ursula von der Leyen and US Deputy National Security Adviser Mike Pyle.