The deal shows that “democracies are addressing the challenges we face together,” said Biden. Von der Leyen praised the compromise as a “milestone”. It had been possible to restore confidence in the transatlantic relationship.
This was preceded by “long and intensive negotiations” with the US, ”as confirmed by the EU’s chief negotiator, Commissioner Valdis Dombrovskis, who is responsible for trade policy. The dispute has not yet been finally resolved, but a “significant step in the right direction” has been taken.
The agreement stipulates that European steel and aluminum exports will remain duty-free if they are within a certain range. This is based on the trade volumes from before 2018, the year in which the then US President Donald Trump imposed the protective tariffs.
Only when this is exceeded, the US tariffs are due. Trade experts speak of a tariff rate quota. In return, the EU is withdrawing the retaliatory tariffs it levied on US products such as whiskey and motorcycles.
Intermediate step to delete the “Trump tariffs”
The volume for unrestricted exports was fought until the last moment. In future, European steel exports should be duty-free up to a total of 4.4 million tons: In addition to the quota of 3.3 million tons, there are exceptions of 1.1 million tons. Taken together, this roughly corresponds to the average for the years 2015 to 2017.
In the case of aluminum, a distinction is made between processed and unprocessed exports. For 18,000 tons of unprocessed aluminum and 366,000 tons of processed aluminum, the tariffs are no longer to apply.
The EU had actually asked for the complete lifting of American tariffs. The Commission only accepts the quota regulation because it sees it as an intervening step towards the elimination of the “Trump tariffs”.
Negotiations on this are to continue – as part of talks on a “global steel and aluminum deal”. Dombrovskis said: “The US and the EU are joining forces to tackle the problem of overcapacity together.”
In addition, both economic powers want to advise on how the production of steel and aluminum can be climate-friendly. There will also be a threat from the EU to impose a new CO2 tariff on steel that is produced in a way that is harmful to the climate. The US has raised serious concerns about this.
The new rounds of talks between the US and the EU should be open to countries that have similar trade policy interests. Initially, two years are earmarked for this. It is clear who they are primarily directed against: China. The People’s Republic is held responsible for a large part of the overcapacity on the steel market. An EU representative spoke of a “massive market distortion”.
As long as the international negotiations continue, the EU does not want to pursue its lawsuit against the USA before the World Trade Organization (WTO). Drombrovskis emphasized that she was not withdrawn.
Direct relief for the European steel industry
The European steel industry suffers particularly badly from the US tariffs. Steel exports to the USA have halved in recent years. The agreement that has now been reached represents an immediate relief for the manufacturers. European aluminum producers were less affected, also because somewhat lower US tariffs applied to their products.
Under President Biden, the US is trying to return to a constructive relationship with the EU. As early as June, the EU and the USA suspended punitive tariffs on products such as airplanes, wine and ketchup until 2026. The agreement should make it possible to calmly resolve the dispute over state aid for the US aircraft manufacturer Boeing and its European rival Airbus.
In September the USA and the EU founded a transatlantic trade and technology council, which is supposed to coordinate technical standards and export controls. Now comes the agreement on steel and aluminum.
Praise comes from the European economy. Markus Beyrer, General Director of the business association Business Europe, spoke of “very good news”, “as companies are currently confronted with rising raw material costs and bottlenecks in the supply chain”.
The US government also emphasized 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.
“We have reached an agreement with the EU that maintains the 232 tariffs, but allows limited quantities of EU steel and aluminum to enter the US duty-free,” said US Secretary of Commerce Gina Raimondo. The Americans had previously found similar arrangements with their neighbors Mexico and Canada.
Turning away from Donald Trump: The new president wants to improve the US’s relationship with Europe again.
(Photo: AP)
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. The EU viewed the tariffs as “completely illegal” and responded 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. This increase is now off the table. “We were able to reach an agreement whereby the EU would drop its retaliatory tariffs,” confirmed Raimondo.
Agreement with Europe as a declaration of war on China
The US government is trying to sell the deal with the Europeans as 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 – an assessment that the EU basically shares.
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.
The desired climate alliance between the USA and Europe also aims at this. 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 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.
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 one influential camp that is why the tariffs have been in place for so long – and why they remain in place, at least in part. 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 maintain good American jobs”.
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 on climate, trade and clean technology