Europe can learn from Biden’s Anti-Inflation Act, Spain’s prime minister said

Spanish Prime Minister Pedro Sanchez.

Anatolian Agency | Anatolian Agency | Getty Images

DAVOS, Switzerland — Spanish Prime Minister Pedro Sanchez told CNBC on Monday that the European Union has a lot to learn from Washington and its new anti-inflation policies, saying he hopes a trade war between the two countries can be avoided.

“We have to learn,” Sanchez told CNBC when asked about the Deflation Act, which the US hopes will make it a hotbed for green investment.

“We need to reform some domestic aspects of our industrial policies, such as state aid, cutting red tape and trying to send a message to industry globally that Europe and of course Spain is a good place to be,” he added.

The sweeping US legislation, which was approved by US lawmakers in August and includes a record $369 billion in spending on climate and energy policies, has received a mixed response from the 27 EU countries. The European Commission, the EU’s executive body, previously said it had “serious concerns” about the design of the financial incentives in the package.

The EU has listed points in the US Deflation Act that it believes may be in breach of international trade rules. One of the biggest hurdles for Europeans is the tax credits provided for electric cars made in North America. This could lead to challenges for European automakers that focus on electric vehicles, such as Volkswagen.

There had been speculation that Washington might find ways for European firms to access these environmental subsidies, but that further angered some European politicians. Belgian Prime Minister Alexandre De Croix, for example, recently accused the US of an “aggressive” campaign to lure companies to its shores with these measures.

“I hope not,” Sanchez said when asked about the possibility of a trade war between the US and the EU.

“I think we need to have that dialogue to reach an agreement,” he said.

“I think this [Russia-Ukraine] the war also shows us the importance of unity on the defense side but also on the economic side within the Western countries,” he added.