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EU in talks with U.S. over new IRA law trade issues

Weekly cabinet meeting in Berlin

BERLIN (Reuters) - The United States is possibly discriminating against European companies through its new Inflation Reduction Act (IRA) law, an EU industry chief said on Thursday, as Germany saw talks with Washington as necessary to avoid a "trade war".

"We are in talks with the Americans so we do not start a kind of trade war now, but we see what competition there is and we have to find European answers to that," German Economy Minister Robert Habeck said in a conference in Berlin on Thursday.

Europe's industry fears that the bill, which gives tax credit for each eligible component produced in a U.S. factory, would take away potential investment from the continent.

The IRA, which was signed into law in August, also provides a tax credit of 30% of the cost of new or upgraded factories that build renewable energy components.

Thierry Breton, the EU commissioner for the internal market said the United States was starting a "subsidy race" through the investment incentives the IRA offers for companies.

"It is really unfortunate that our so-called like-minded partners resort to such means," Breton was quoted as saying by German newspaper Handelsblatt on Thursday.

Breton said the bill could push companies in the European Union to move significant parts of their supply chains to the United States, adding that the European Commission and Washington were setting up a task force to look for solutions on Friday.

(Reporting by Riham Alkousaa; editing by Matthias Williams)