Germany, France urge talks on US climate law to avoid trade war

German and French ministers called for talks with the US administration to avoid a trade war over measures in President Joe Biden’s climate law they say could discriminate against European companies.

The officials discussed the risks of industry relocating production to the US and various measures they could take, German Economy Minister Robert Habeck said on Wednesday after a virtual meeting with French counterpart Bruno Le Maire.

“This package must not destroy a level playing field between our two economies, the European and the US economy, and there we see a danger,” Habeck said. “We can’t go in a trade war at times like this.”

Le Maire added that Europe should seize any opportunity to talk to the US administration and “explain very clearly that we do not want to be hit by the very latest decisions.”

For France and Germany, provisions in the Inflation Reduction Act related to tax credits for American-made electric vehicles are a particularly thorny issue. Many EU nations have spent large sums of public money on subsidies that have no such requirements for local production. 

German Finance Minister Christian Lindner, who also attended Wednesday’s meeting, was more cautious, saying the EU should focus on bolstering its single market and increasing productivity.

“We don’t need to fear the Inflation Reduction Act of the United States, when we make efforts in strengthening our competitiveness,” he said.