Spanish Prime Minister Pedro Sanchez.

Anadolu Agency | Anadolu Agency | Getty Images

DAVOS, Switzerland — Spanish Prime Minister Pedro Sanchez told CNBC Monday that the European Union has something to learn from Washington and its new policies to fight inflation, saying he hopes that a trade war between the two sides can be avoided.

“We need to learn,” Sanchez told CNBC when asked the Inflation Reduction Act which the U.S. hopes will make it the go-to place for green investment.

“We need to reform some internal aspects of our industrial policies such as state aid, reducing bureaucracy and trying to send a message for the industry worldwide that’s it’s Europe, and of course Spain, that is a good place to locate,” he added.

The sweeping U.S. legislation, which was approved by U.S. lawmakers in August and includes a record $369 billion in spending on climate and energy policies, has received a mixed response from the 27 EU nations. The European Commission, the executive arm of the EU, has previously said there are “serious concerns” about the design of the financial incentives in the package.

The EU has listed points in the U.S. Inflation Reduction Act that it believes could be in breach of international trade rules. One of the biggest sticking points for the Europeans is the tax credits granted for electric cars made in North America. This could bring challenges to European carmakers that are focusing on EVs, such as Volkswagen.

There has been suggestions that Washington could find ways for European firms to access these green subsidies, but this has further enraged some European politicians. Belgium PM Alexander De Croo, for example, recently accused the U.S. of an “aggressive” campaign to lure companies to its shores with these measures.

“I hope not,” Sanchez said when asked about the possibility of a trade war breaking out between the U.S. and the EU.

“I think that we need to have that dialogue to reach an agreement,” he said.

“I think that this [Russia-Ukraine] war also shows us the importance of unity on the defense side but also on the economic side within the Western countries,” he added.