China Takes on US in Discriminatory Subsidies Allegations for Electric Vehicles

China to oppose Biden’s electric vehicle initiatives at the WTO

The United States has been hit with a complaint by China over perceived discriminatory requirements for electric vehicle subsidies. The complaint comes in response to a new U.S. rule that went into effect on January 1, which states that electric car buyers are not eligible for tax credits if critical minerals or other battery components were made by Chinese, Russian, North Korean, or Iranian companies.

The Chinese Commerce Ministry did not specify what prompted the complaint but expressed concerns that the U.S. has implemented discriminatory subsidy policies for new energy vehicles under the act. The Ministry believes that these policies exclude Chinese products, distort fair competition, and disrupt the global supply chain for new energy vehicles.

China is a dominant player in the battery market for electric vehicles and has a rapidly expanding auto industry that could challenge established carmakers globally. The European Union has also expressed concerns about Chinese subsidies for electric vehicles. Under the new U.S. rule, only 13 out of over 50 EV models on sale in the U.S. were eligible for tax credits, prompting automakers to source eligible parts to qualify for the credits.

The real-world impact of the case is uncertain, given that if the United States were to lose and appeal the ruling, China’s case would likely not progress due to the WTO’s Appellate Body not functioning since late 2019

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