Emmanuel Macron took aim at a new U.S. law that he says unfairly subsidizes North American electric-vehicle production, threatening to overshadow the French president’s trip to Washington.
The Inflation Reduction Act and a separate law meant to incentivize semiconductor production “are very good for the U.S. economy, but they weren’t properly coordinated with European economies,” Macron said on Good Morning America on Thursday ahead of a meeting with President Joe Biden. “They create just the absence of a level playing field.”
The European Union has said it may take the U.S. to the World Trade Organization over the climate and tax law, which aims to boost domestic production of electric cars. Last week, Macron’s finance minister accused Washington of pursuing a “Chinese-style” industrial policy that discriminates against non-U.S. companies.
Macron and the rest of the EU are struggling to maintain unity with the U.S. as they coordinate their responses to Russia’s war in Ukraine and an intensifying energy crisis that threatens to throw the region into a recession. The EU’s competition chief warned of the risks a new trade war with the U.S. could inflict on the bloc.
Macron believes that the climate law weakens America’s allies and it’s not in the U.S. interest to impoverish European countries, according to a person familiar with the president’s thinking who spoke on the condition of anonymity. When Macron speaks with Biden, he’ll push for exemptions for the EU that would create a level playing field and better coordination on trade matters.
French officials have said there is little hope the Americans will take concrete actions to allay their concerns. The law, which has drawn criticism from auto-making nations worldwide, is unlikely to be amended.
Macron has long pushed for a so-called Buy European Act, which would reserve public tender offers and subsidies for manufacturers on the continent. The idea has always run into opposition in the EU, but failure to win American concessions could give the bloc’s subsidy push new momentum.
A senior administration official told reporters earlier this week that Washington sees a role for possible European subsidies to aid EU businesses who won’t benefit from tax credits in the American law.
If the law goes ahead as-is, France stands to attract €10 billion ($10.3 billion) less investment and create 10,000 fewer jobs, according to estimates by the French government.
Margrethe Vestager told reporters in Paris on Thursday that the climate law could be very damaging for European businesses, as well as in other major economies, including Japan and South Korea. But she said avoiding a subsidy race in an absolute priority and the EU is working constructively with the U.S. to find solutions as soon as possible.
“One war at a time is what we can master,” Vestager said, noting the energy crisis in Europe sparked by Russia’s invasion of Ukraine. “We have found solutions on very difficult issues before and we should be able to do it again because I don’t think the geopolitical situation we are in allows for big democracies to have a fallout.”
—With assistance from Ania Nussbaum and William Horobin