Washington Katherine Tai, US government trade representative, is only briefly in Brussels this week. It landed on Tuesday, and on Thursday it’s off to London for a G7 ministerial meeting. But the focus of their visit is a sensitive issue that has weighed on transatlantic relations for more than three years: the punitive tariffs on steel and aluminum from the EU, introduced under Donald Trump and continued by Joe Biden.
Now there is movement in the conflict. Because after months of standstill, both sides seem closer to an agreement than ever. Recently, there were increasing signals that the Biden administration could lift the tariffs, albeit under certain conditions. She was “optimistic” that there would be a solution, Tai said in mid-October.
And economics minister Gina Raimondo, who long defended the punitive tariffs as a “helpful instrument”, recently changed the tone. The trade war has created “enormous tensions” with the EU, she said in the Economic Club of Washington. Now it has to be a matter of “regaining trust”, so resolving the customs dispute is “top priority”.
Tai met EU Trade Commissioner Valdis Dombrovskis several times in the past few weeks: once at the start of the new transatlantic Trade and Technology Council (TTC) in Pittsburgh, then at the G20 ministerial meeting in Italy.
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US media unanimously reported that the US side had presented the Europeans with a new offer to negotiate. According to this, a so-called Tariff Rate Quota (TRQ) model is under discussion, under which a certain contingent of materials can be shipped duty-free to the USA again. Tariffs would only be due again above a specified limit. The US has a similar arrangement with its neighbors Mexico and Canada, for example for dairy products.
According to the Bloomberg portal, the possible agreement with the Europeans initially only affects steel, not aluminum. The aim, so it is said in Washington, is an agreement by the end of the month, but according to the Politico website there is still a lot to be discussed: while Brussels is pushing for the highest possible volume, the US wants to set a lower quota.
Parts of the US steel industry want to keep the tariffs
The EU had made concessions when it failed to double its retaliatory tariffs against the US on June 1, as originally planned. But the grace period expires at the end of November, when there is a risk of higher tariffs on American bourbon, orange juice or Harleys. A quick solution is therefore also in the interests of the USA, Biden has several industries behind his neck. “The tariffs are devastating,” complained the largest distillery association in the USA. American bourbon exports to the EU have plummeted by almost 40 percent.
The US president is putting increasing pressure on the metalworking industry: most corporate groups criticize the punitive tariffs as an unnecessary financial burden because they are struggling with the supply chain crisis, exploding raw material prices, bottlenecks and rising inflation. The US Chamber of Commerce, the largest lobbying association in the US, is pushing for a quick end to the punitive tariffs. “It is high time,” warned the organization, which represents more than 7,000 companies. “The price of waiting is too high”.
However, there is an influential camp that may be the reason why tariffs have been held in place for so long. The backing from the US Midwest is politically important to Biden and his party, the US Democrats. In the 2018 presidential election, it was many states in this region that secured Biden the victory over Trump.
The United Steelworkers (USW) union, which represents hundreds of thousands of manufacturing workers, has a lot of influence in the Midwest. In fact, the trade war ensured that steel imports – especially from China – were drastically reduced, and the decline of domestic industry was slowed slightly.
The fear of cheap Chinese steel
The steel manufacturers are pressing for Biden to maintain the punitive tariffs against the EU – or at least to present an alternative, for example in the form of the tariff quotas being considered. In a fire letter to Biden, the USW, the American Iron and Steel Institute, and the Steel Manufacturers Association warned of a complete halt to trade barriers.
If the tariffs fall, so the criticism, Chinese cheap steel would increasingly wash into the US market via third countries. The American steel manufacturers are therefore demanding a clause according to which steel imports from the EU actually originate in the.
The hot topic of China also plays a major role in the negotiations between Washington and Brussels. The Biden government is pushing for a transatlantic alliance against Beijing and calling for the EU to take stronger action against cheap Chinese competition. China produces half of the world’s steel.
Even before the start of her current trip, Tai made it clear what she expected from the Europeans: they were trying to “cope with global overcapacities and the common challenges posed by non-market economies”. What was meant by this: China.
More: No big deal, no illusions – the US is moving away from central targets in the trade war with China.