The EU and the US are heading dangerously towards a transatlantic trade dispute, despite the current desire of the two Western giants to show solidarity. EU trade ministers insisted on 25 June that they would be forced to respond if Washington complied with all the provisions of the Inflation Reduction Act. The law benefits local US companies through subsidies and, according to the EU, it would unfairly discriminate against EU companies wishing to compete for contracts.

　　The report said that although allies have united in imposing tough sanctions on Russia since the Russia-Ukraine conflict, they have been unable to mask differences over trade issues. No one wants to get into a tit-for-tat or a subsidy race," said Leo Varadkar, Ireland's deputy prime minister and minister for enterprise, trade and jobs. But what the US is doing is really inconsistent with the principles of free trade and fair competition."

　　Valdis Dombrovskis, Executive Vice-President of the European Commission, said, "What we are asking for is fairness. We want and expect that European companies and exports are treated in the United States in the same way as American companies and exports are treated in Europe."

　　The report said this concern is shared by the governments of EU member states, in addition to the European Commission, which negotiates on trade issues on behalf of the 27 member states.

　　Czech Industry and Trade Minister Jozef Sikla said the EU remains hopeful that the differences will be resolved at the December 5 meeting of the task force set up by the US and the EU, as the EU is likely to receive treatment similar to that of Canada and Mexico, free from subsidy conditions.

　　The report notes that trade disputes have been a red line in transatlantic relations for decades. The subsidies drawn up under the Inflation Reduction Act passed by the US Congress in August are particularly irritating for the EU. For example, buyers of electric cars can receive a tax credit of up to $7,500 as long as the batteries used in the car are made in North America, using minerals mined or recycled on the continent.

　　In response, EU ministers warned on 25 January that time was running out to change Washington's plan to offer excise tax credits for US-made electric cars and other green products. The EU believes that the $430 billion Inflation Reduction Act, which will come into force next January, could make the US the world leader in the electric car market at the expense of Europe. It wants EU products to be exempted.

　　Reports indicate that possible EU actions include complaints to the World Trade Organisation, the imposition of trade sanctions, or increased subsidies to European companies. The EU will have to weigh these considerations against the need for cooperation in the geopolitical arena, and the importance of presenting a united front.