Scholz and Macron threaten trade retaliation against Biden

After publicly falling out, Olaf Scholz and Emmanuel Macron have found something they agree on: mounting alarm over unfair competition from the U.S. and the potential need for Europe to hit back, - writes POLITICO.

The German chancellor and the French president discussed their joint concerns during nearly three-and-a-half hours of talks over a lunch of fish, wine and Champagne in Paris.

They agreed that recent American state subsidy plans represent market-distorting measures that aim to convince companies to shift their production to the U.S., according to people familiar with their discussions. And that is a problem they want the European Union to address.

Both leaders agreed that the EU cannot remain idle if Washington pushes ahead with its Inflation Reduction Act, which offers tax cuts and energy benefits for companies investing on U.S. soil, in its current form. Specifically, the recently signed U.S. legislation encourages consumers to “Buy American” when it comes to choosing an electric vehicle — a move particularly galling for major car industries in the likes of France and Germany.

The message from the Paris lunch is: ‘If the U.S. doesn't scale back, then the EU will have to strike back. That move would risk plunging transatlantic relations into a new trade war.’

Crucially, Berlin — which has traditionally been more reluctant when it comes to confronting the U.S. in trade disputes — is indeed backing the French push. Scholz agrees that the EU will need to roll out countermeasures similar to the U.S. scheme if Washington refuses to address key concerns voiced by Berlin and Paris, according to people familiar with the chancellor's thinking.

Before bringing out the big guns, though, Scholz and Macron want to try to reach a negotiated solution with Washington. This should be done via a new "EU-U.S. Taskforce on the Inflation Reduction Act" that was established during a meeting between European Commission President Ursula von der Leyen and U.S. Deputy National Security Adviser Mike Pyle.

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