EU braces for steel quotas to end trade war with Biden

Europe is edging toward a deal in the coming days to end the transatlantic trade war, but that truce now looks likely to mean Brussels must accept quotas on how much steel can be shipped to the United States without paying higher level tariffs.

Former U.S. President Donald Trump triggered a trade war with Europe in 2018 by slapping tariffs on steel and aluminum imports that he classed as a threat to national security. European diplomats had originally hoped that Washington would remove these duties under U.S. President Joe Biden but he has been unwilling to do so without winning concessions for key steelmaking constituencies in America.

The contours of a deal now appear to be forming around Europe accepting tariff rate quotas. This would secure an immediate removal of the Trump-era tariffs but would mean that high duties on European metal would kick in again if EU exports surpassed a certain level. EU officials had regarded these kinds of measures as blackmail under Trump, but are now accepting there may be no other way out of the standoff.

In a meeting with trade diplomats on Thursday, the European Commission was optimistic that a deal could be reached, two people in the meeting said. But diplomats did not receive more details of any future settlement, as the Commission does not want to undermine the negotiations with Washington. It's also not clear yet whether it will be a long-term solution, the two people said.

The clock is ticking because Brussels and Washington have set a self-imposed deadline of November 1 to put their dispute to bed. The EU's retaliatory tariffs on American products, including countermeasures against Harley-Davidson motorcycles and bourbon whiskey, will double as of December 1 and the European Commission needs roughly a month to backtrack on that escalation once a deal has been reached.

Karl Tachelet, director of international relations and external affairs at EU steel industry lobby Eurofer, said the future bilateral deal would involve tariff rate quotas. He said: “Both partners are looking to find an agreement on tariff rate quotas that would replace the current import tariff of 25 percent.”

Tachelet said the details are essential for Eurofer to evaluate the outcome of the negotiations. These elements would include the size of the EU quota, subdivisions per product and separate quotas for different EU countries.

Both sides previously said a future deal should lead to cooperation on addressing overall global steel capacity. U.S. Trade Representative Katherine Tai told reporters in Brussels last week the negotiations were about more than just tariffs. “I don’t want you to think that essentially this is an exercise at a Turkish bazaar where we are negotiating over the price for a carpet,” she said.

The steel industry is optimistic a deal will be found. "I would be very surprised that this would totally derail," Tachelet said. He added that there's much more at stake than steel.

"The Biden administration is keen on renewing more friendly relations and looking to common interests more than the confrontational approach from the Trump and [former U.S. Trade Representative Robert] Lighthizer administration," he said. "So that is a context which should really create a lot of interest and energy towards a deal."

The European aluminum lobby opposes a solution involving tariff rate quotas and called simply for a total withdrawal of the Trump-era national security tariffs. "Any other proposed outcome would only continue penalizing the aluminium producing and using sectors on both sides of the Atlantic," said Gerd Götz, director general of European Aluminium.

The European Commission also insists that there was no legal basis for those duties.

"As a trusted U.S. ally, the EU cannot be deemed to pose a security threat to the U.S." a Commission spokesperson said on Thursday. "These Trump tariffs have to go."

Source: Politico