There is scope to limit EU-US tension over IRA

Significance

The EU worries that the bill will harm the competitiveness of the European economy as it seeks to recover from COVID-19 and the war in Ukraine. Brussels is contemplating various responses, including action at the WTO, new subsidies for EU firms and loosening state-aid rules.

Impacts

• The IRA threatens to undermine the competitiveness of German auto manufacturers in the US market, especially regarding EVs.
• The IRA could indirectly benefit EU-US trade, especially if it succeeds in hastening economic recovery in the United States.
• Should the Republican Party win by a considerable margin in 2024, it would be more likely to repeal the IRA than to modify it.