Talks between French president Emmanuel Macron and US president Joe Biden this week in Washington have been a "turning point" able to avert a trade war between the two sides of the Atlantic, France's finance minister Bruno Le Maire said on Friday.
One of the topics on the two leaders' agenda this week was the potential negative impact on the European economy of Biden's U.S. Inflation Reduction Act (IRA), which will deliver $369 billion worth of subsidies and tax breaks to U.S.-based companies transitioning to a low-carbon economy starting in January.
Since Biden's administration announced the proposal earlier this year, France, as well as the rest of Europe, has been raising its concerns about the bill potentially weakening European companies at a time when these are already struggling with high energy prices and inflation.
Tax breaks to US manufacturers would put European companies at a disadvantage to their rivals across the Atlantic, while EU countries would be blocked from offering generous tax breaks to European companies by EU state aid rules.
Biden had until now seemed to ignore the issue, which was raised to him by EU leaders during the G20 in Bali earlier this month. But Macron has apparently managed to convince the US president of the dangerous impact of the bill on European companies during talks this week and avert a "subsidies race", according to Le Maire.
In a joint interview with Reuters and the Financial Times on Friday, the minister said that thanks to the French president's state visit to Washington "there's now a real awareness (of the issue), recognition by the U.S. administration, but also by Congress."
In a joint news conference with Macron on Thursday, Biden said that "tweaks" could be applied to the way the legislative components of the IRA are implemented to prevent European countries from being hurt by its consequences.
"For example, there's a provision in it that says that there is the exception for anyone who has a free trade agreement with us," Biden said. "That was added by a member of the United States Congress who acknowledges that he just meant allies; he didn't mean, literally, free trade agreement. So, there's a lot we can work out."
Le Maire said that Biden's suggestion that allies could be treated like countries with which the US has a trade deal is a "major breakthrough".
"It's a major breakthrough to say: they're our allies, they're our friends. So even if we don't have a trade deal with Europe, we're going to consider European components the same way as those from countries with a trade deal," Le Maire said.
European officials had previously said that their best hope in regard to mitigating the negative impact of the IRA on European companies is to secure exemptions along the lines of what Canada and Mexico already have.
"It's not an adjustment, it's an important political choice," he added.
French officials have suggested that these "tweaks" might happen through executive orders by the Biden administration.