U.S. Looks to Allay European Fears of a Subsidy War

The Biden administration is trying to ease European concerns about America’s new climate and tax law, which some allies view as a protectionist industrial policy that threatens their economies.

More than a year after passage of the Inflation Reduction Act, European officials are still frustrated by the legislation, which included more than $300 billion in spending and tax credits aimed at bolstering America’s clean energy industry. U.S. allies have complained that the legislation puts them at a disadvantage by making their economies a less attractive place to invest given the scale of the American incentives.

With wars intensifying in Ukraine and the Middle East, the Biden administration is looking to assuage those concerns and send a clear message to its closest allies that America is not trying to start a subsidy war.

“A misrepresentation I’ve often heard is that the I.R.A. signals a turn toward American protectionism or the start of a subsidy race to the bottom,” Wally Adeyemo, the deputy Treasury secretary, plans to say in a speech in Germany on Tuesday, according to a copy of his prepared remarks. “I want to be clear: It does neither.”