EU, US move to end steel row and point to China

File photo. United States Trade Representative Katherine C. Tai testifies before the Senate Finance Committee on Capitol Hill in Washington, DC, USA, 12 May 2021. [Pool/EPA/EFE]

The EU and US took a step towards a post-Trump trade truce on Monday (17 May), agreeing to hold talks to end a tit-for-tat feud over steel and aluminium tariffs.

In a carefully phrased statement, United States Trade Representative Katherine Tai and her EU counterpart Valdis Dombrovskis announced “discussions to address global steel and aluminium excess capacity” that would tackle China’s outsize role in the problem.

The Europeans will, in addition, temporarily suspend a plan to increase tariffs on the US, the EU said.

The peace offering is the latest chapter in a row that began in June 2018 when then US president Donald Trump imposed tariffs of 25% on steel and 10% on aluminium from Europe, Asia and elsewhere.

Trump starts trade war with allies, Europe to respond 'within hours'

President Donald Trump announced on Thursday (31 May) that the United States would slap tariffs on steel and aluminium from the EU, Canada and Mexico, prompting Europe to say it would respond with “counterbalancing measures within hours” in what amounts to a trade war with Washington.

Brussels responded with counter-tariffs on 2.8 billion euros worth of iconic US products, including bourbon whiskey, jeans, orange juice and Harley-Davidson motorbikes.

EU tariffs on US goods to take effect in early July

The EU is set to impose €2.8billion worth in tariffs on US exports in early July in response to duties Donald Trump’s administration has levied on European steel and aluminium, the European Commission confirmed on Wednesday (6 June).

The EU was planning to increase those counter-tariffs on 1 June but, given the easing of tensions with the Biden administration, will now refrain from doing so.

In return, both sides have agreed to talk about the overproduction of steel, which has helped depress prices as output — mainly from China — has flooded the global market and put steel plants in difficulty.

This would be a fresh attempt to pressure Beijing after years of on-and-off international talks to address China’s steel overproduction delivered no result.

‘China to account’

While never addressing the Trump tariffs specifically, the statement said both sides “agreed to avoid changes on these issues that negatively affect bilateral trade”.

Singling out China, the statement said that “the United States and EU member states are allies and partners, sharing similar national security interests as democratic, market economies”.

This alignment, it added, means the EU and US “can partner to… hold countries like China that support trade-distorting policies to account.”

The Europeans had hoped that the US would commit further to the truce and had offered to suspend all metals-related tariffs for six months as they pursued a longer term solution.

Still, an EU official said that there was a clear willingness from both sides “to end this dispute” and that there was a “clear path” to do that in the coming weeks.

Another official cautioned however that even if “the tone is more friendly… the policy issues have not changed” with the change in administration.

“It’s not the case that we have now a rosy picture or everything now turns to be to be in bright colours,” the official added.

Despite being a Trump policy, the tariffs have proved politically popular in steel producing states in the US midwest and the Biden administration has for now decided to keep the protections in place.

EU trade ministers meeting on Thursday will discuss the matter in a video call with Tai.

German MEP Bernd Lange, who heads European Parliament’s trade committee, said Europe must remain vigilant on Washington’s reluctance to end the tariffs and pointed to a meeting between President Joe Biden and the EU chiefs next month in Brussels.

Lange said Europe’s “gesture needs to be reciprocated” by Washington at the EU-US summit.

“If not, rebalancing tariffs,” he warned, in reference to the tariff hike that was temporarily suspended for as much as six months by the EU.

In an earlier sign of détente, both sides in March suspended punitive tariffs in the separate, two-decade long dispute over aircraft manufacturers Airbus and Boeing.

Yet another fight — this one over digital taxes slapped on US big tech by France, Spain and other EU nations — has also mellowed, with US tariffs suspended and all sides pursuing a global solution at the OECD.

Subscribe to our newsletters