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China has filed a World Trade Organization (WTO) complaint against the US over rules discouraging EV-makers from sourcing battery materials from China.
Driving the news: The Chinese Commerce Ministry said the US’s Inflation Reduction Act (IRA), which excludes Chinese products, is “discriminatory” and “seriously disrupts” the global supply chain for EVs.
- It said it was launching the WTO complaint to "maintain a fair level playing field of competition for the global market".
Catch-up quick: The IRA provides tax credits to help consumers buy EVs, but the EVs using critical minerals or other battery components from China, Russia, North Korea, or Iran don’t qualify.
- Under the rules that took effect on Jan. 1, only 13 of the 50+ EVs on sale in the US are eligible for the credits.
The other side: In response, the US criticized China’s complaint, saying China is the one at fault.
- “China continues to use unfair, non-market policies and practices to undermine fair competition and pursue the dominance of China’s manufacturers, both in China and in global markets,” US Trade Representative Katherine Tai said in a statement
Of note: Besides the US, the European Union has launched its own investigation into Chinese subsidies for EVs last year.
The bottom line: The ultimate impact of the case is uncertain.
- If the US loses and appeals the ruling, China’s case most likely would go nowhere. That is because the WTO’s Appellate Body, essentially its judicial authority court, hasn’t functioned since late 2019 due to the US stalling appointment of new judges.
