European Commission President Ursula von der Leyen called for the European Union and the United States to invest in clean technology together and not risk a damaging trade war during a speech on Sunday.

Facing climate change and competition from China, "the U.S. and the EU have a vast common interest to preserve our industrial leadership," von der Leyen said at the College of Europe in Bruges.

The top EU official made the appeal to Washington as concerns in Europe grow over Washington's recent $700 billion landmark bill called the Inflation Reduction Act (IRA).

The legislation ensures tax credits for U.S. consumers who purchase electric vehicles with batteries manufactured domestically and in certain countries with free trade agreements with the U.S. The EU and U.S. are major trading partners but have no such deal.

The EU, home to many large automakers, fears that this will cause its own manufacturers to lose out, with some calling for a similar public investment policy in response.

Von der Leyen said the EU and the U.S. would continue to work together to resolve the issue but warned the bloc would respond as necessary to Washington's clean technology program.

The U.S. and EU should invest together in "two clean energy industrial bases on both sides of the Atlantic," von der Leyen said, suggesting that usual strict public investment rules in the EU should be relaxed to do so.

The commission president also said the U.S. and EU should work closer together to set regulatory standards for electric vehicles.

Washington and Brussels must cooperate closer to source and produce critical raw materials, and reduce China's advantages in the sector, she said.