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WTO finds U.S. energy tax credits under Inflation Reduction Act violate trade agreements

Report found that the tax credits were inconsistent with national treatment obligations and constituted prohibited subsidies.

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january 30, 2026

The World Trade Organization (WTO) today released a panel report in the dispute brought by China over four energy tax credits passed under the Inflation Reduction Act of 2022.

According to a USTR release, the WTO report found that the U.S. legislation was inconsistent with WTO rules, specifically citing violations of national treatment obligations under the General Agreement on Tariffs and Trade (GATT) 1994 and the Trade-Related Investment Measures (TRIMS) Agreement, and identifying the tax credits as prohibited subsidies under the Subsidies and Countervailing Measures (SCM) Agreement.

Background

China initiated the dispute in March 2024, alleging that the U.S. energy tax credits were inconsistent with various WTO provisions. The WTO Dispute Settlement Body established a panel in December 2024. The report circulated on January 30, 2026, rejected the U.S. defense that the measures were necessary to protect U.S. public morals under the general exceptions provision of the GATT 1994.

For more information, contact a professional with KPMG Trade & Customs services:

 

Andrew Siciliano
Partner, U.S. & Global Practice Leader

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Partner

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Principal

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Principal

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Frances Xing
Principal

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