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There is scope to limit EU-US tension over IRA

Wednesday, December 28, 2022

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.

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