France’s finance minister, Bruno Le Maire stated on Monday that the new U.S. Inflation Reduction Act (IRA) law poses a major threat to European businesses, and the European Union has to stand strong in opposition to it.

 

“We must clearly tell our U.S. partners that it is a major problem for us. It is not acceptable. It could create a major shock in European industry,” Le Maire told BFM TV.

 

According to Brussels, the legislation goes against global trade agreements. The $369 billion package of subsidies and tax credits for U.S. producers and consumers infringes World Trade Organisation treaties that state nations cannot discriminate against imported products, Financial Times reports.

 

Indeed, European industries fear that the Inflation Reduction Act could remove potential investment from the continent and may also lead to retaliation from the EU and other allies of the United States.

 

 “If implemented in its current form, the Act risks causing not only economic damage to both the U.S. and its closest trading partners, resulting in inefficiencies and market distortions, but could also trigger a harmful global subsidy race to the bottom on key technologies and inputs for the green transition,” according to an EU document. “Moreover, it risks creating tensions that could lead to reciprocal or retaliatory measures.”

 

The commission added that the U.S. must “give EU companies the same treatment as other U.S. trading partners.”

 

The Inflation Reduction Act, which was passed in August, also provides a 30% tax credit on the cost of new or upgraded factories that manufacture renewable energy components, Reuters reports.

 

Although some countries, such as France, are already urging retaliation, the EU trade commissioner Valdis Dombrovskis prefers to opt for negotiations. Senior U.S. and commission officials held talks last week for the first time.

 

“The task force is a clear, senior-level commitment by the U.S. to address the serious concerns raised by the EU in relation to the Act,” the EU added.