The EU should avoid the "slippery road" of protectionism when engaging in a bitter industrial standoff with the United States, European Parliament President Roberta Metsola told POLITICO.

“Do we enter a subsidy war? I would very much caution against, but I fear when I see an increase in protectionist angles," Metsola said.

Europe is upset about provisions in the U.S. Inflation Reduction Act that would provide billions of dollars in subsidies and incentives to the domestic clean-tech and electric-car sectors. The EU fears that it could give U.S. manufacturers a competitive advantage at a time when European industrialists are facing severe economic difficulties related to pandemic recovery and huge energy bills.

The subsidy scheme has even led some in Europe to accuse Washington of speculation while war rages on the European continent.

Metsola said the EU should avoid the "slippery road of who goes to the very bottom of the protectionist race." She added that some degree of state intervention is also necessary to stimulate economic growth.

She said the EU should try to gain a competitive advantage globally by sticking to its democratic values and pursuing its climate agenda.

Metsola also called for a more proactive approach to relations with Beijing and other countries in Asia, describing the EU's industrial dependence on China as "economically huge." "We have not worked together with our Asian partners enough, so many trade deals are still outstanding on the table. Where are we? Why don't we lead those debates rather than whine?" she asked.