The race to rid the world of carbon emissions has created a potential green trade war between the United States and the United Kingdom.
When Joe Biden’s Inflation Reduction Act was passed by the US Congress last summer, it was a good idea. The act included billions of dollars in subsidies for buying electric cars and other eco-friendly products. This was done to boost America’s green economy and fight climate change.
But the fact that these subsidies will only be available to people who buy products made in the United States has upset many European countries. They see it as a thinly veiled attempt to get a piece of Europe’s and Britain’s high-tech manufacturing sector by getting European companies to move factories to the US.
Welcome to the global race to be the leader in green technology, where the future of the planet and the global economy are tied together in a geopolitical green trade war that could be dangerous.
The US and the EU are at odds with each other, but some East Asian countries also show displeasure. Some business people in the UK are wondering where the UK stands in this growing fight.
Most countries give money to green technology, but Joe Biden’s decision to give money only to cars made in North America scared many allies. People who buy cars made in the United States can now get a tax credit worth up to $7,500 (£6,000).
How is the UK feeling?
More clarity is needed on where the UK stands regarding the green trade war.
Even though it is known that the Business and Trade Secretaries have talked to their US counterparts about their concerns, they need clarification on what they want. Grant Shapps, who is in charge of the business in the UK, says that the country doesn’t need a package of green incentives like the US does because the UK is already “ahead of the game.”
He is also sure that the UK will be included in what may end up being a split between the EU and the US over the green trade war.
He also said that he had talked to John Kerry, the climate envoy for the Biden ministry and that much of what the US is doing is good. “This new bill needs to be trimmed around the parts that could affect us, like the protectionist parts.”
Where does the US stand?
Leaders who have talked to their US counterparts about the Inflation Reduction Act say that it all happened by accident and that the US “forgot” about Europe when they wrote this law, which is an economic “half aggression.”
People have said this was meant for China and not Europe. But there is no doubt that big European manufacturers are having their minds changed. Even though the need for net zero does lead to more manufacturing in Europe and North America, one European leader says that there is a red line that shouldn’t be crossed.
People told me things could get complicated if European export production, investments, and jobs started to move across the Atlantic.
There is also worry that “green technologies” won’t be enough to fix this. Because the pandemic caused bottlenecks in the supply chain, countries are thinking twice about how much they depend on East Asia, not just China, to make their goods.
In both the EU and the US, new places are being built to make microchips, and large tech companies in the west are getting a lot of money to do this. The Europeans call this “strategic autonomy,” while the Americans call it “friend shoring,” which means putting supply chains back in place for friendly countries.
It means that huge amounts of investment will be moved away from where they are now when many industries are going through huge transformations. This process could change how the world makes things for the next 100 years.
Some people in the British business world worry that the EU and the US will fight over not just electric cars but also microchips and other important technologies. And it’s clear that the “global” that “global Britain” wanted to be a part of after Brexit has changed significantly, raising some important strategic questions about Britain’s future.
How close are we to a green trade war?
But now, new tensions make people wonder how much inflation will go down and worry about where Britain fits in a world that has changed a lot.
A green trade war across the Atlantic is a big worry in this situation. Joe Biden’s new bill to boost the green economy in the United States includes subsidies of £300 billion for buying electric cars, but only if most are made in North America. The Inflation Reduction Act also affects a wide range of other manufacturing and production, causing some European companies to move factories to the US. Fertilizer companies are scratching their heads and wondering why European leaders don’t make similar laws.
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The US says that its new laws are meant to give China a run for its money. But the EU leaders are angry and ready to respond to the green trade war, possibly with big subsidies of their own that will probably also have “Buy European” clauses.