Europe-US ties on shaky ground

While Germany and France have been bickering again, they seem to have found some consensus in opposing an unusual foe – the United States.

During a three-hour working lunch of fish and champagne at the Elysee Palace in Paris last week, French President Emmanuel Macron and German Chancellor Olaf Scholz discussed energy, defense and the economy.

When it was over, Scholz tweeted that “Germany and France stand close together and are approaching the challenges together”.

And while they continue to differ on a range of policies, they have found something they agree on: mounting alarm over what they view as unfair competition from the US and the potential need for Europe to hit back. The two leaders are united in their irritation over a new US law that would give a tax break to electric vehicles whose components and batteries are produced in the US.

The development comes as some Republican lawmakers in the US signal that their support for Ukraine is limited. House minority leader Kevin McCarthy said Republicans are not going to “write a blank check” to Ukraine at a time of possible economic recession. His comments strike at the heart of the biggest immediate issues facing Europe today – the conflict in Ukraine and subsequent energy crisis.

After Europe came together in surprising solidarity and a united front to impose strict sanctions on Russia – and now faces the consequences of skyrocketing energy prices – would its erstwhile ally the US really dial down support for the Ukraine, and by implication support for the European Union itself?

No doubt Macron and Scholz discussed that possibility as well as the odds of Republicans taking back control of the House and Senate in next week’s mid-term elections. With Democrats and Republicans locked in what they view as an existential battle for the heart and soul of America, the needs of Europe could easily become a low priority.

With that as the backdrop, President Joe Biden’s so-called Inflation Reduction Act could make some sense as he tries to placate Americans who feel the country has lost its economic dominance. Part of the legislation mandates that US electric vehicle batteries must be made primarily in the US with US materials.

But the post-luncheon message from Macron and Scholz seems clear: If the US doesn’t scale back some of the new legislation, the EU might strike back to avoid unfair competition or losing investment, a move that could risk plunging transatlantic relations into a trade war.

Macron made the warning public in an interview with French TV. “We need a Buy European Act like the Americans. We need (subsidies) for our European manufacturers,” he said, referring to electric cars.

“You have China that is protecting its industry, the US that is protecting its industry and Europe that is an open house,” Macron said, noting that he and Scholz “have a real convergence to move forward on the topic”.

For his part, Scholz made his discomfort clear when he publicly said that Europe will have to discuss the Inflation Reduction Act with the US “in great depth”.

The meetings and statements come amid a rising sense of real dread about the future of European industry. The skyrocketing price of energy could be a fatal blow to the sector.

- Jon Van Housen and Mariella Radaelli are international veteran journalists based in Italy