A trade war is brewing between the United States and its closest allies. When Thierry Breton, the EU’s internal markets commissioner, pulled out of a summit with US officials just before Christmas, he complained that the agenda ‘no longer gives sufficient space to issues of concern to many European industry ministers and businesses’. A few days before, Emmanuel Macron cornered senator Joe Manchin in Washington DC. ‘You’re hurting my country’, the French president told Manchin. The senator was given a similarly frosty reception at the World Economic Forum in Davos, where Germany’s Olaf Scholz and Luxembourg’s Xavier Bettel accosted him caustically.
The Europeans are upset about Joe Biden’s Inflation Reduction Act (IRA), written by Manchin’s office, which commits $370 billion (£300 billion) to clean energy projects based in North America.
Quite how that reduces inflation is an open question. The IRA is the biggest green subsidy in US history, intended to bolster America’s eco-industries against China’s growing dominance by cutting Chinese firms out of various green supply chains.
By trying to hollow out China’s renewables lead, the US is sucking production, investment and research out of friendly nations
In the process, however, the new Act has also cut out friendly nations which don’t have trade deals with Washington.
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