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More protectionism is the wrong solution

It all sounds so technical.

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More protectionism is the wrong solution

It all sounds so technical. The “Green Deal Industrial Plan” from Brussels. Washington's Inflation Reduction Act. But behind the two terms hides the largest economic exchange of blows between Europe and the USA in years. A "tit for tat", as the Americans say. Tit for tat. One would have expected that more in the brief era of Donald Trump than during the presidency of Joe Biden.

The Inflation Reduction Act, or IRA for short, i.e. Biden’s billion-dollar subsidies for climate-friendly technologies, makes Europeans aware of an unpleasant truth: that the era of trade wars did not end with Trump’s departure. On the contrary. Joe Biden is emerging as the even greater trade warrior. His tone isn't that cheeky. But his economic policy follows – understandably – only the interests of the United States.

One should not think that Biden can easily be swayed. That America's president, if only enough European politicians fly to Washington and negotiate in a friendly manner, will noticeably weaken his subsidy package. The IRA is too important to him for that. The law should one day become part of his “legacy”, his political legacy.

So what can Europe do? The Commission wants to relax the rules for state aid and finance climate-friendly projects with EU funds. This is the only way, says the authority, to ensure the continent's competitiveness. But that doesn't sound convincing.

In fact, new subsidies from Brussels are only likely to make matters worse. Where there is too much government, competitiveness threatens to decline. Innovation and entrepreneurial spirit will fall by the wayside. Europe is in a global competition for climate-friendly technologies and industrial jobs of the future. More protectionism and abandoning free market principles cannot be the solution.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 5 a.m. with the financial journalists from WELT. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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