The World Trade Organization (WTO) on Monday agreed to set up an expert panel to investigate US subsidies for electric vehicles (EVs) following a complaint from China accusing Washington of unfair competition. This move escalates tensions between the two largest economies as they face off over trade and clean energy policies.
China initially filed the case with the WTO in March, alleging that the US Inflation Reduction Act (IRA) includes discriminatory subsidy policies that favor electric vehicles and hybrids produced in the United States. The IRA, enacted in 2022, provides significant financial incentives to support companies engaged in the energy transition, particularly those manufacturing EVs domestically.
Beijing claims that the IRA distorts global competition, disrupts supply chains for new energy vehicles, and violates WTO rules. In response, China has threatened retaliation, arguing that the US subsidies unfairly target its companies.
The United States, however, rejected China’s claims, stating that the IRA is intended to address the climate crisis and boost US economic competitiveness. US officials argue that the subsidies help counter China’s extensive state-backed support for its domestic EV and green technology sectors. Washington insists that its policies are fully compliant with WTO regulations and necessary to tackle global environmental challenges.
“China’s challenge is particularly hypocritical in light of its targeting of clean energy sectors for global dominance,” a US representative said during the WTO’s Dispute Settlement Board meeting. The US vowed to vigorously defend its clean energy tax credits, describing them as essential in combating the climate crisis.
China had accused the United States of undermining fair competition by offering preferential treatment to locally produced EVs, but the US has maintained that China’s industrial policies—heavily reliant on government support—are the real threat to a balanced global trading system.
Monday’s decision to establish a panel follows Washington’s attempt to block the process in July. According to WTO rules, member states can only block the formation of an expert panel once, and China’s second request for the investigation was approved automatically.
The dispute is unfolding as tensions between the two economic giants mount on multiple fronts, including trade tariffs, technology restrictions, and a potential US ban on Chinese-owned social media app TikTok. Earlier this year, the US increased tariffs on Chinese-made electric vehicles, marking a further step in the intensifying competition.
With both sides preparing for a protracted dispute, the WTO panel’s findings could shape the future of clean energy trade policy and further complicate the already strained US-China relationship.
