China jolts US at WTO with complaint over ‘discriminatory’ EV subsidies

US President Joe Biden signed the Inflation Reduction Act into law in August 2022. The wide-ranging bill was designed to tame inflation and invest in domestic industries while also promoting the country’s transition to clean energy.

The act requires EVs to undergo final assembly in North America to qualify for subsidies. “For new electric, fuel cell electric, and plug-in hybrid electric vehicles acquired, delivered and placed in service after August 16, 2022,” said the US Department of Energy in a note, “this requirement applies”.

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“China is firmly opposed,” the commerce ministry said. “We urge the US to abide by WTO rules, respect the development trend of the global new energy vehicle industry and rectify its discriminatory policies.”

Carlos Gutierrez, a former US commerce secretary, told the Post at the Boao Forum for Asia on Tuesday any hypothetical tariffs imposed on “made by China” goods assembled in a third country like Mexico, including electric vehicles, would be “unfortunate.”

Along with lithium-ion batteries and solar panels, EVs are a major commodity in the global shift to green fuel sources that Beijing also hopes to leverage as new growth and export drivers. China’s EV exports had a roaring 2023, up 77.6 per cent year on year and with more than 120 million vehicles shipped according to official data.

But that boom may not last. With risks of overcapacity looming and external pressures likely from the US and European Union, the three products may see their blockbuster growth stunted this year.

Brussels has launched an anti-subsidy probe into Chinese EVs, and could impose tariffs as high as double digits as one of several potential punitive measures.

US Secretary of Commerce Gina Raimondo said in February that China’s EVs could pose a data security risk, as they collect a “huge amount of information about a driver”. Shortly thereafter, the White House announced it would be conducting its own investigation into China’s vehicles, which could lead to heavier import tariffs.

Former US president Donald Trump, well into his campaign to retake the White House, has also threatened to slap 100 per cent duties on Chinese EVs assembled in Mexico. Trump is the architect of the trade war with China, now in its sixth year.

Long Yongtu, China’s former chief trade negotiator who helped the country’s accession to the UN trade body, said at the Boao Forum that China would make full use of WTO mechanisms to settle disputes and defend its interests.

Beijing filed its case ahead of a planned trip by US Treasury secretary Janet Yellen to China next month to discuss financial and economic issues with her counterparts.

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