US and EU reach peace deal on Trump-era tariffs on steel and aluminium

The US and EU have agreed to end a festering dispute over US steel and aluminium tariffs imposed by former president Donald Trump in 2018, removing an irritant in transatlantic relations and averting a spike in EU retaliatory tariffs, US officials have said.

Commerce secretary Gina Raimondo told reporters on Saturday that the deal would maintain US section 232 tariffs of 25% on steel and 10% aluminium, while allowing “limited volumes” of EU-produced metals into the US duty free.

It eliminates a source of friction between the allies and lets them focus on negotiating a new global trade agreement to address worldwide excess steel and aluminium capacity, mainly centred in China, and reduce carbon emissions from the industries.

EU trade chief Valdis Dombrovskis confirmed the deal, writing on Twitter that “we have agreed with US to pause” the trade dispute and launch cooperation on a future global arrangement on sustainable steel and aluminium. Dombrovskis said the deal will be formally announced by Biden and European Commission president Ursula von der Leyen on Sunday.

US officials did not specify the volume of duty-free steel to be allowed into the US under a tariff-rate quota system agreed upon with the EU. Sources familiar with the deal, speaking on condition of anonymity, have said annual volumes above 3.3m tons would be subject to tariffs.

The deal grants an additional two years of duty-free access above the quota for EU steel products that won Commerce Department exclusions in the past year, US officials said.

The agreement requires EU steel and aluminum to be entirely produced in the bloc – a standard known as “melted and poured” – to qualify for duty-free status. The provision is aimed at preventing metals from China and non-EU countries from being minimally processed in Europe before export to the US.

Europe exported about 5m tons of steel annually to the US prior to Trump’s imposition of the tariffs on national security grounds.

“The agreement ultimately to negotiate a carbon-based arrangement on steel and aluminium trade addresses both Chinese overproduction and carbon intensity in the steel and aluminium sector,” White House national security adviser Jake Sullivan told reporters, adding that the climate and workers can be protected at the same time.

US steel production, which relies heavily on electric-arc furnaces, is regarded as having far lower carbon emissions than the coal-fueled blastfurnaces prevalent in China.

Biden has sought to mend fences with European allies following Trump’s presidency to more broadly confront China’s state-driven economic practices, which have led to Beijing building massive excess steelmaking capacity that has flooded global markets.

The deal will eliminate Europe’s retaliatory tariffs against US products including bourbon whiskey, Harley-Davidson motorcycles and motor boats that were set to double on 1 December, US officials said.

Raimondo said the deal will reduce costs for steel-consuming US manufacturers. Steel prices have more than tripled in the past year to records topping $1,900 a ton as the industry has struggled to keep up with a demand surge after Covid-19 pandemic-related shutdowns, contributing to inflation.

US primary aluminium producers, which had dwindled to two companies by the time Trump imposed the tariffs, will be able to maintain their investments in reviving domestic capacity because the quotas are set at very low levels, well below pre-tariff volumes, said Mark Duffy, CEO of the American primary aluminium association industry group.

American iron and steel institute president Kevin Dempsey said the quota arrangement will help “prevent another steel import surge that would undermine our industry and destroy good-paying American jobs”.

“We urge the US and EU to take active steps to hold China and other countries that employ trade-distorting policies to account,” Dempsey added. “We also believe US-EU cooperation should focus on new trade approaches to address climate change, including through development of effective carbon border adjustment measures.”

Due to its exit from the EU, Britain’s steel exports remain subject to the tariffs, as are those of other US allies including Japan. The US Chamber of Commerce, which opposed the metals tariffs from the start, said the duties and quotas should be dropped from close allies.



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