The US has doubled down on its criticism of "unfair non-market policies" in the Chinese EV industry in response to a World Trade Organisation (WTO) dispute filed by China against the US Inflation Reduction Act (IRA).
"The PRC continues to use unfair, non-market policies and practices to undermine fair competition and pursue the dominance of the PRC’s manufacturers both in the PRC and in global markets," US Trade Representative Katherine Tai said in a statement.
The US and EU have long criticised the Chinese automotive industry for receiving government help in the form of grants and below-market rate interest loans. A recent study found that the Chinese EV fleet is growing at ten times the rate of the US.
In contrast, Tai defends the 2022 IRA, calling it: "our contribution to a clean energy future that we are collectively seeking with our allies and partners."
"The Inflation Reduction Act is a groundbreaking tool for the United States to seriously address the global climate crisis and invest in US economic competitiveness," Tai adds.
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The statement comes as a response to a dispute consultation issued to the WTO by China, which reportedly accused the IRA of creating discriminatory subsidies against Chinese goods.
Tai says the US Trade Mission was "carefully reviewing" the consultation request.
The IRA provides both buy-side and sell-side subsidy funding for EVs which contain a sufficient proportion of materials sourced from the US or its trade allies.
Eligible EVs cannot contain battery components that were manufactured or assembled from a foreign entity of concern.
From January 2025, if manufacturers wish to qualify for tax credits, their EV batteries cannot contain critical minerals that were extracted, processed, or recycled by a 'foreign entity of concern'.
These regulations will target US OEMs buying components or finished batteries directly from Chinese companies, and will also disincentivise OEMs from using critical minerals that have passed through China – even if the batteries themselves are made in the US.
This is on top of an existing 27.5pc tariff in place on Chinese auto imports to the US.
While the US and EU are seeking ways to prevent their auto industries being undercut by Chinese competition in the EV space, China has been quietly preparing the logistics infrastructure for a wide-reaching export business – although market leader BYD has said it will not target the US market any time soon.
The action from the Chinese government could suggest a concerted effort to support Chinese automakers' export strategies, long a fear of many US auto industry commentators.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
