From WSJopinion: The West’s climate policies are already harming consumers and slowing economic growth by raising energy prices and distorting investment. Now they are threatening a trade war that will cause more harm.
’s destructive trade wars against allies? Apparently not. His “super aggressive” climate protectionism—to quote French President Emmanuel Macron—is infuriating U.S. friends and may set off a subsidy and tariff war.
The dispute involves tax credits for electric-vehicle and battery production. The IRA’s $7,500 consumer tax credit are restricted to EVs assembled in North America. Most foreign auto makers make EVs abroad and export them because the global and U.S. markets are still small. They can’t tap the consumer tax credit unless they invest in American production. But making EVs in the U.S.—or Canada or Mexico—may be more costly and could render their cars less competitive in other export markets.
The law also offers generous tax credits for domestic EV battery production, including a $35 per kilowatt-hour credit for U.S.-made battery cells, plus $10 per kilowatt-hour for domestically produced modules. These credits are expected to shave the cost of producing an EV battery by 30% to 40% and reportedly prompted Tesla to reconsider plans to make battery cells in Germany.LG Energy Solution
The law also includes up to $40 billion in loans to build new EV and battery factories. Oh, and don’t forget the manufacturing tax credits for wind turbines, solar panels and other CO2-reducing technologies. “The U.S. has turned on a shop vac to suck up incentives and we’re standing here with a dust buster,” a Canadian Manufacturers & Exporters official said last month.
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