Schulz and Macron threaten commercial retaliation against Biden

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BERLIN/PARIS – After a public feud, Olaf Schulz and Emmanuel Macron have found something to agree on: mounting concern about unfair competition from the United States and the potential need for Europe to respond.

The German chancellor and the French president discussed their common concerns during nearly three and a half hours of talks over a lunch of fish, wine and champagne in Paris on Wednesday.

They agreed that recent US government support plans represented market-distorting measures aimed at persuading companies to shift production to the United States, according to people familiar with their discussions. This is a problem they want the European Union to tackle.

This was followed by a meeting of minds on this matter public disagreements In recent weeks on major political issues such as energy and defense, breaking what is often seen as the European Union’s central political alliance between its two largest economies.

But even though their lunch came against embarrassing wallpaperIn its current form, the two leaders agreed that the European Union could not remain idly by if Washington went ahead with the Inflation Cut Act, which offers tax cuts and energy benefits to companies investing on US soil, in its current form. Specifically, recently signed US legislation encourages consumers to “buy American cars” when it comes to choosing an electric vehicle – a particularly alarming move for major auto industries in the likes of France and Germany.

The message from the Paris lunch is: If the US does not back down, the EU will have to respond. Similar incentive schemes will be needed for companies to avoid unfair competition or loss of investments. Such a move could risk plunging transatlantic relations into a new trade war.

Macron was the first to make the stark warning public. We need European purchase law like Americans, we need reservation [our subsidies] to our European manufacturers”, the French president He said Wednesday night In an interview with the France 2 TV channel, in special reference to government support for electric cars.

Schulz and Macron agreed that the EU should act if the US introduced a “Buy America” law that offers incentives to companies investing on US soil, which would particularly affect the French and German electric car industries | David Hecker / Getty Images

Macron also cited similar concerns about state-backed competition from China: “You have China protecting its industry, the United States protecting its industry, and Europe being an open house,” Macron said, adding:[Scholz and I] A real affinity to move the topic forward, we had a very good conversation.”

Crucially, Berlin—which has traditionally been more reluctant when it comes to confronting the United States in trade disputes—already supports the French push. Schulz agrees that the EU will need to roll out countermeasures similar to the US scheme if Washington refuses to address the main concerns expressed by Berlin and Paris, according to people familiar with the chancellor’s thinking.

Schulz is not a big fan of Macron’s formulation of the “European Purchase Act” because it invokes the nearly 90-year-old “American Purchase Act,” which is often criticized for being protectionist because it favors American companies. But the chancellor shares Macron’s concerns about unfair competitive advantages, People said.

Earlier this month, Schulze said publicly that Europe would have to discuss inflation-reduction law with the US “in great depth”.

In a blow to Germany’s industrial core, chemical giant BASF announce On Wednesday it plans to reduce its businesses and jobs in Germany, with company president Martin Brudermüller citing higher gas prices – which he has criticized for being six times higher than the US – as well as increased EU regulation as the reason.

German Finance Minister Christian Lindner said in tweetvowing to take various measures such as “tax exemption for private investments”.

Before getting the big guns out, Schulz and Macron want to try and reach a negotiated solution with Washington. This should be done through a new “EU-US Working Group on Inflation Reduction Act” that has been created during the meeting Between European Commission President Ursula von der Leyen and US Deputy National Security Adviser Mike Pyle on Tuesday.

The task force of EU and US officials will meet via video link at the end of next week, to underscore the seriousness of the European push.

Moreover, EU trade ministers will meet to informal meeting In Prague next Monday, US trade envoy Catherine Taye plans to attend to discuss the tensions.

In Brussels, the Commission is also looking anxiously at Macron’s wording of the “European Purchase Law”, which evokes the protectionist tendencies that the EU establishment has long sought to combat.

“Every action we take has to be in accordance with WTO rules,” a commission official said, adding that Europe and the US should resolve differences via talks and “not engage in tit-for-tat trade war measures as we have seen under them. [former U.S. President Donald] trump card.”