Tensions roiled the annual World Economic Forum meetings in Davos earlier this month. Anxious diplomats and business leaders wondered whether China and the United States might de-escalate their confrontation and bury the hatchet. While continuing to endure a pandemic that has upended everyday life for years, Europeans have grappled with the ramifications of Russia’s invasion of Ukraine in the form of an unprecedented cost-of-living crisis.
But the forum also witnessed a more surprising confrontation. The United States and its European allies found themselves at odds over recent U.S. economic legislation. European policymakers accosted Senator Joe Manchin, Democrat of West Virginia, for his role in finalizing U.S. President Joe Biden’s Inflation Reduction Act. In addition to expanding the federal government’s tax collection capacity and greenlighting some drug price controls, the IRA authorized at least $369 billion in subsidies for clean energy projects and products. Europeans object to the law’s fine print, which requires the companies that receive many of these subsidies to produce in the United States. Manchin responded by chiding Europeans for their already high tariffs on U.S. cars and for privileging regulation and the taxation of dirty industries over providing incentives to develop cleaner ones.
