A trade dispute between Washington and Beijing over clean energy subsidies has taken a fresh turn, after a World Trade Organization panel found in China’s favour and urged the to revise key parts of its climate incentives.
The panel concluded that certain tax credits under the US Inflation Reduction Act unfairly favour domestically produced goods, agreeing with China’s claim that the measures put foreign suppliers at a disadvantage. It recommended that the US remove the disputed domestic content bonuses attached to investment and production tax credits by October 1, 2026, calling that timeline reasonable.
The ruling adds to growing tensions over how far countries can go in using industrial policy to support green transitions without breaching global trade rules. In a statement responding to the report, the Office of the US Trade Representative pushed back, arguing that the case exposes deeper flaws in the WTO framework itself. According to Washington, existing rules are ill-equipped to deal with what it describes as widespread excess capacity in sectors such as energy technology, an issue the US has repeatedly linked to China’s manufacturing scale.
Although the US is entitled to appeal the decision, the outcome is unlikely to change much in practice. The WTO’s appellate body has been effectively shut down for years, meaning any appeal would leave the dispute in limbo without a binding final ruling.
Beijing, by contrast, welcomed the panel’s findings. China’s Ministry of Commerce described the decision as fair and impartial, reinforcing its view that the US subsidies distort competition. China first brought the case to the WTO in March 2024, saying the measures were necessary to protect its electric vehicle industry and preserve fair competition in global markets.
The Inflation Reduction Act, introduced during Joe Biden’s presidency, channels billions of dollars into tax incentives aimed at boosting electric vehicle adoption and expanding renewable energy manufacturing within the US. While the law is central to America’s decarbonisation strategy, it has increasingly become a flashpoint with trading partners who argue that climate policy is being used as a tool for economic protectionism.
