Washington The US and the European Union have settled their dispute over punitive tariffs from the era of ex-President Donald Trump. A corresponding agreement was reached on the sidelines of the G20 summit in Rome, said the national security advisor in the White House, Jake Sullivan, the trade representative Katherine Tai and Minister of Economic Affairs Gina Raimondo on Saturday.
All three representatives of the US government stressed that the tariffs under Article 232 of the US trade law will not be completely abolished. According to the agreement, a certain amount of European steel and aluminum may be imported into the USA again duty-free. In addition, both parties would suspend the matter pending before the bodies of the World Trade Organization (WTO), they said.
“We have an agreement with the EU that maintains the 232 tariffs but allows limited amounts of EU steel and aluminum to enter the US duty-free,” said Raimondo. The agreement is based on what is known as a Tariff Rate Quota (TRQ) model; the USA has a similar arrangement with its neighbors Mexico and Canada.
According to the Reuters news agency, the EU will in future be allowed to export 3.3 million tons of steel per year to the USA free of duty. That is significantly less than was possible a few years ago: Before Trump declared the trade war on the world in March 2018, the EU shipped around five million tons of steel to the US annually, and the volume fell dramatically with the trade war.
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Nonetheless, the agreement should bring some relief to European steelmakers. The new model would exempt steel exports worth around ten billion dollars from punitive tariffs, according to Reuters. Details on the conditions for aluminum exports were initially not known.
EU Commission Vice President Valdis Dombrovskis commented on Twitter that Washington and Brussels had “interrupted” their trade dispute. Official details would be announced on Sunday by Biden and Commission President Ursula von der Leyen.
Biden’s predecessor Trump justified the punitive tariffs by stating that foreign products posed a threat to US national security. The Europeans and other traditional partners were outraged by the maneuver. For its part, the EU reacted with tariffs on products made in the USA such as peanut butter, jeans, bourbon whiskey, orange juice and motorcycles.
Actually, the retaliatory tariffs should rise from December 1st. But the EU has agreed to delete them, it said from Washington. “We were able to reach an agreement whereby the EU would drop its retaliatory tariffs (on American goods),” said Raimondo. It was unclear on Saturday whether the EU would simply waive the planned increase or completely cancel the retaliatory tariffs.
Declaration of war on China
According to the US government, the agreement also includes a declaration of war on China. The deal will ensure “that all steel that reaches the US via Europe is produced entirely in Europe,” said the US Secretary of Commerce – and not in China. Washington accuses Beijing of subsidizing domestic industry and creating artificially low prices for unfair competition. China produces half of the world’s steel. The Biden government has been pushing for a transatlantic alliance for months and is demanding that the EU take stronger action against cheap Chinese competition.
Associated with this are apparently plans to advance the climate alliance between the USA and Europe. Raimondo stated that future trade talks should take into account the “carbon intensity” of steel and aluminum. The aim is for both sides to manufacture “cleaner” products than in China.
“China’s lack of environmental standards is part of what lowers costs, but it also contributes significantly to climate change,” criticized the minister. In the United States, Biden has been fighting for months in vain for a law aimed at promoting a green energy transition.
The focus on climate-friendly raw materials can be seen as a small concession to the EU, which had presented plans for a CO2 border tax. A so-called Carbon Border Adjustment Mechanism (CBAM) can make imported goods with a high CO2 balance more expensive – such as imports of steel, aluminum, cement, electricity and certain chemicals. But Washington has so far shown little cooperation. A CO2 border tax is currently unlikely to get a majority in the US Congress.
Why some of the tariffs remain in force
The rapprochement in the tariff dispute is seen as an important step in US President Biden’s efforts to reverse the political legacy of his predecessor Trump. At the beginning of his term in office, Biden had set the goal of cementing the relationship between the USA and Europe. As early as June, the EU and the USA suspended punitive tariffs on products such as airplanes, wine and ketchup until 2026. The agreement is intended to make it possible to calmly resolve the dispute over state aid for the US aircraft manufacturer Boeing and its European rival Airbus.
The tariff dispute was a major point of conflict between the US and the EU.
(Photo: dpa)
In the past few weeks, the US president has come under pressure in his own country to tackle the tariff dispute. Many companies criticize the punitive tariffs as an unnecessary financial burden as they struggle with the supply chain crisis, skyrocketing commodity prices, bottlenecks and rising inflation. Products such as washing machines and cars have become noticeably more expensive in the USA, and US steel has reached record prices of 1,900 US dollars per ton. The deal with the EU, it is hoped, could lower costs.
However, there is an influential camp that is why the tariffs have been held in place for so long – and why they remain at least partially in place. The support from the American Midwest is politically important for Biden and his party, the US Democrats: The region secured Biden victory over Trump in the 2020 elections. Hundreds of thousands of workers live here in production who see their industry endangered by imports.
The United Steelworkers union welcomed the deal and stressed that the quota principle would “keep US industry competitive”. The American Iron and Steel Institute also stated that curtailed steel imports were “elementary in order to keep American jobs good”. Another large association, the Alliance of American Manufacturing, sharply criticized the EU. “It is time for the EU to tackle its own unfair trade practices, including the heavy subsidies that many EU members give to their steelmakers.”
More: The US and the EU want to work together more closely in the framework of the new Trade and Technology Council. It deals with topics such as climate, trade and clean technology.