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US President Joe Biden's landmark climate action plan may have been trailed by billions of dollars in clean energy investment, but its potential to reshape trade lines has strained ties with allies.

The Inflation Reduction Act (IRA), signed into law on August 16 last year, directs some $370 billion in subsidies toward America's energy transition, including tax breaks for US-made electric vehicles and batteries.

The incentives boost American manufacturing after years of offshoring. But they have also triggered fears that they could draw businesses out of other countries.

"This was really the United States coming into the game in a big way," said Joshua Meltzer, senior fellow at the Brookings Institution, an American think tank.

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