On Tuesday, China filed a complaint with the World Trade Organization against the U.S., accusing the country of having discriminatory requirements for electric vehicle subsidies. The Chinese Commerce Ministry did not specify what prompted this move, but it stated that the U.S. has formulated discriminatory subsidy policies for new energy vehicles under the 2022 Inflation Reduction Act, which is part of President Joe Biden’s climate legislation. These policies exclude Chinese products and distort fair competition, disrupting the global supply chain for new energy vehicles.
The United States has been accused of discrimination in its electric vehicle subsidy policies by China, which has prompted Beijing to file a complaint with the World Trade Organization (WTO) on Tuesday. The Chinese Commerce Ministry did not specify what led to this move, but it highlighted that the US’s new rule that went into effect on January 1 prohibits electric car buyers from receiving tax credits of $3,750 to $7,500 if critical minerals or other battery components were manufactured by companies from China, Russia, North Korea or Iran.
China is a dominant player in the electric vehicle battery industry and has a growing auto industry that could challenge established carmakers globally. The European Union has also raised concerns about Chinese subsidies for electric vehicles due to the new US rule that only 13 out of over 50 electric vehicle models sold in the US are eligible for tax credits leading automakers to scramble to source parts that meet these requirements. Member countries of WTO can file complaints against each other’s trade practices and seek relief through a dispute settlement process; however, if the US loses and appeals the ruling, it may not progress due to WTO Appellate Body not functioning since 2019.
China’s complaint against US discrimination in its electric vehicle subsidy policies highlights growing tensions between two superpowers over trade issues. The new US rule excludes Chinese products from receiving tax credits for buyers who purchase critical minerals or other battery components manufactured by companies from China or Russia or North Korea or Iran.
The impact of this case remains uncertain as member countries of WTO can file complaints against each other’s trade practices and seek relief through a dispute settlement process; however, if America loses and appeals ruling it may not progress due to WTO Appellate Body not functioning since 2019.
China is one of the largest producers of critical minerals such as lithium-ion batteries used in electric cars worldwide. As such, any restrictions on imports could significantly impact China’s ability to compete in global markets.
This dispute highlights broader trade tensions between Beijing and Washington over issues ranging from tariffs and intellectual property rights to technology transfer restrictions and cyber espionage accusations.
Overall, this case underscores how global trade flows can be disrupted when countries introduce discriminatory policies aimed at protecting domestic industries at the expense of international cooperation and fairness.