As European Commission President Ursula von der Leyen sat in the Oval Office last month she gushed before the cameras about the U.S. Inflation Reduction Act.
“It’s great that there is such a massive investment in wind and clean technologies now,” she said of America’s green awakening.
It was not until the press shuffled out that von der Leyen shifted to a much sterner message, according to people familiar with the meeting.
Europe’s executive chief warned President Joe Biden that the law’s bias against European companies was unacceptable, and anything short of a pragmatic fix would become a major irritant in the transatlantic relationship.
The U.S. and EU are negotiating a limited critical minerals deal that may put a salve on those simmering tensions but Washington’s protectionist agenda is still causing anxiety in Brussels, where the U.S. needs help pressuring China.
Meanwhile, the Biden administration remains frustrated with what it views as the EU’s rigid adherence to a rules-based trading system that is no longer fit for purpose.
“Europe was genuinely surprised that the Biden administration did not revert back to the pre-Trump days,” said Kelly Ann Shaw, a partner at law firm Hogan Lovells who served on the Trump administration’s trade and economic team. “They missed the memo that the politics on trade have changed.”
If the U.S. and EU can bridge their gaps on trade, they may preserve the west’s economic bulwark against China’s rise and Russia’s expansionism.
But if talks flounder, a new transatlantic trade war could undercut a mainstay of the world economic order and create lasting headwinds for global growth.