China calls U.S. EV tax breaks ‘discriminatory'

China joined in the criticism of the new U.S. law providing tax breaks for electric vehicles, threatening unspecified action if needed to protect its interests from a law it says is "discriminatory."

The clause in the Inflation Reduction Act ruling out tax breaks for vehicles assembled abroad "discriminates against similar imported goods, and is a suspected breach of the World Trade Organization principles" Shu Jueting, spokesperson of the Ministry of Commerce said during a Thursday briefing. "China will continue to assess and evaluate implementation of the legislation and will take measures to safeguard its legal interests when necessary," she added, without providing details.

The comments add to the criticism from the European Union and South Korea over the law, which says that cars will not be eligible for up to $7,500 in subsidies if critical battery components come from China, Russia and other "foreign entities of concern." Much of the world's battery supply chain is reliant on China, which is home to some of the world's largest battery giants such including Tesla supplier Contemporary Amperex Technology Co.

A senior official in Seoul earlier called the U.S. rules "betrayal," although officials have met with their U.S. counterparts on the issue in recent days and SNE Research said the nation's suppliers hope to be offered some sort of exemption. The European Union raised the issue with the U.S. last week, with a European Commission spokesperson saying afterwards the EU would "take the necessary steps to defend its interests."

China's ambassador to the U.S. Qin Gang also warned against the potential risks of trying to cut China out of the EV chain, saying the interests of both nations are "intertwined" during a visit to the Detroit auto show last week. "The electric vehicle value chain, or specifically the supply chain, is very globalized," said Qin, adding all players will continue to "work in accordance with economic laws."