EU’s response to the US Inflation Reduction Act (IRA)

Although the US Inflation Reduction Act (IRA) pursues a range of aims, the two main ones are the lowering of inflation by removing purchasing power from the US economy, and to provide the United State's contribution to fighting climate change. Unlike similar EU measures, most of its climate support is done via tax subsidies. Although hailed in the EU for heralding a new era in US climate policy, the IRA is being criticised for its outright 'Buy American' provisions. Amongst others, it is feared that EU exports to the US will be hampered, and that EU firms might be enticed to relocate to the US. So far, the EU has reacted by adapting its State aid rules and the legislative proposals of the Green Deal Industrial Plan, but it also relies upon the Recovery and Resilience Facility's dedicated climate subsidies to offset the IRA's effects on the EU economy. Further possible EU responses are currently discussed.