China has taken its trade dispute with the United States to the World Trade Organization (WTO), filing a complaint against what it describes as “discriminatory” subsidies for electric vehicles (EVs). This move adds another layer to the ongoing series of escalating trade tensions between the two economic giants.
According to China’s Ministry of Commerce, the complaint aims to ensure a fair environment for Chinese auto manufacturers and the global industry. The ministry stated on Tuesday that the US has implemented discriminatory policies through its Inflation Reduction Act, which excludes products from China and other WTO members from receiving subsidies under the pretext of climate change and environmental protection.
The Inflation Reduction Act, signed into law by US President Joe Biden in August 2022, is a comprehensive bill aimed at curbing inflation, boosting domestic industries, and promoting the transition to clean energy. One of its provisions requires EVs to undergo final assembly in North America to qualify for subsidies, a requirement that China views as unfair.
In response to China’s complaint, the US Department of Energy clarified that the assembly requirement applies to new electric, fuel cell electric, and plug-in hybrid electric vehicles acquired after August 16, 2022.
China’s Ministry of Commerce expressed firm opposition to the US policies, urging adherence to WTO rules and respect for the global new energy vehicle industry’s development trend.
Carlos Gutierrez, a former US commerce secretary, commented on the situation, stating that any potential tariffs imposed on goods assembled in a third country, such as Mexico, including electric vehicles, would be regrettable.
EVs, along with lithium-ion batteries and solar panels, play a significant role in the global transition to green fuel sources, a shift that China aims to capitalize on for new growth and export opportunities.
Despite China’s booming EV exports in 2023, with a 77.6% year-on-year increase and over 120 million vehicles shipped, concerns about overcapacity and external pressures from the US and European Union could hinder further growth in the industry this year.
The European Commission has initiated an anti-subsidy probe into Chinese EVs, potentially leading to tariffs as high as double digits. Meanwhile, US officials have raised concerns about data security risks associated with Chinese EVs and are considering imposing heavier import tariffs.
China’s former chief trade negotiator, Long Yongtu, emphasized Beijing’s commitment to using WTO mechanisms to settle disputes and defend its interests. The filing of the WTO case precedes a planned visit by US Treasury Secretary Janet Yellen to China next month for discussions on financial and economic matters.