In a letter to the US on Friday, the UK pointed out its opposition to green subsidies, on the basis that they could "harm multiple economies" and "undermine UK-US trade and investment flows."

The letter, cited by The Financial Times and The Times newspapers, written by UK Trade Secretary Kemi Badenoch to her American counterpart Katherine Tai, referred to the climate subsidy package worth the amount of $370 billion.

The Inflation Reduction Act (IRA) of the US contains tax cuts for American-manufactured electric cars in order to slowly transition to a low-carbon economy, as it argues that these subsidies are necessary to tackle climate change.

Badenoch, however, opposed the plan by saying that it would "harm multiple economies across the world and impact global supply chains in batteries, electric vehicles and wider renewables."

The EU has „serious concerns“ about the US Inflation Reduction Act, accusing the US of breaching international trade rules

=> In a nutshell the US 🇺🇸 is further pushing the deindustrialization of the EU. Now the EU warns of a trade war 🇪🇺🏚️

Ze German Finance Minister Lindner 🇩🇪 https://t.co/sC0g75K4Wg pic.twitter.com/oZeIZaeuYd

— Yoda Research (@YodaResearch) November 7, 2022

Threat to EU jobs

The Times reported Badenoch as saying that "shared goals to promote free and fair trade internationally" would be at risk, adding: "The UK expects to be and should, as the closest of US allies, be part of any flexibilities in the implementation of the IRA."

Britain had already joined the EU and countries outside the bloc in opposing the US' IRA, as the bloc views the Act as a threat to European jobs - especially targeting the energy and auto sectors.

Earlier this month, in a keynote speech at the College of Europe in Brugge, Belgium, European Commission President Ursula von der Leyen talked about the EU's competitiveness in the global market.

She admitted that the IRA is "raising concerns" in Europe, adding that it could lead to unfair competition and broken supply chains. However, Europe is in a good place to compete in international markets and may enhance its standing even further.  

Back in October, German Chancellor Olaf Scholz and French President Emmanuel Macron agreed that recent American subsidy plans will end up distorting the market, as they intend to sway companies to shift production to the US. 

The EU cannot stand by, the leaders agreed, if the US goes ahead with tax cuts and energy benefits for companies investing in the US under the IRA. Moreover, the recent US legislation persuades consumers to “Buy American” if they look into purchasing an electric car.

In light of that, Macron made the first warning public in an interview for France 2. “We need a Buy European Act like the Americans, we need to reserve [our subsidies] for our European manufacturers,” he said, referring to state subsidies for electric cars specifically. 

The IRA has exemptions for products from its trade bloc partners Canada and Mexico, and, on Monday, Paris and Berlin called for such exemptions to be expanded to EU nations.