What will the US elections mean for Europe's green economy?

With US presidential election day approaching, many European investors are worried about the future of the green economy in both America and Europe.

Currently, the US and the UK are key markets for European hybrid and electric vehicles. Exports jumped from just 2% in 2017 to 26% in 2023 and are now estimated to be worth almost €7 billion, reports Euronews.

Republican candidate Donald Trump has proposed a 10 percent import tax on all foreign-made goods and a 100 percent tax on all imported vehicles if he wins the election.

Investors worry that this promise could threaten the growth of the electric and hybrid car market while increasing already growing competition from Chinese products.

European products are already at a disadvantage compared to those made in the US, which benefit from huge subsidies introduced by the Anti-Inflation Act.

What will be the future of the Inflation Reduction Act?

The Cut-Inflation Act signed by President Joe Biden in 2022 poured $220 billion into clean energy.

The landmark climate law caused sales of US-made electric vehicles to jump 55% in a year, driven by tax cuts and federal incentives. This law expanded the tax credits: up to $7,500 for buyers of new clean vehicles and up to $4,000 for the purchase of used clean vehicles.

The Inflation Reduction Act is the most significant action taken by the US Congress on clean energy and climate change in the nation's history. However, the green transition is still in its infancy and the electric vehicle market in the US is not yet stable.

“It will take at least until 2030 to facilitate the purchase of these vehicles and provide systematic maintenance. We have at least another five years before the market stabilizes. If the U.S. stops supporting electric vehicles, that's going to be a big problem," said Lew Fulton, director of energy futures at the University of California, Davis.

Democratic candidate Kamala Harris has indicated she plans to continue supporting the Deflation Act if she wins, maintaining support for US-made green technology.

Trump is not a fan of the climate law and has said he would dismantle it while also canceling any unspent funds under the "misnamed Deflation Act."

Continued support for the DEA and stabilization of the US market will likely make it more expensive to buy green technology from Europe. Since imported EVs make up 30% of the US electric vehicle market, Trump's planned import taxes are likely to affect European manufacturers as well.