US, EU strike trade deal to remove steel, aluminum tariffs

  • October 31, 2021
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THE US and the European Union (EU) have reached a trade truce on steel and aluminum that will allow the allies to remove tariffs on more than $10 billion of their exports each year.

Negotiators reached an agreement Saturday as they worked to balance market demands and climate change, US officials said, speaking on the sidelines of a Group of 20 summit in Rome. Bloomberg News reported earlier that the two sides were on the brink of an agreement.

The two sides were working hard to reach a deal before Dec. 1, when the European retaliatory tariffs were set to double. The 25% tariffs will apply to EU exports beyond 3.3 million tons, according to two people familiar with the talks, who asked not to be identified before a formal announcement.

“We’ve reached an agreement with the EU which maintains the 232 tariffs, but allows limited volumes of EU steel and aluminum to enter the US tariff-free,” said US Commerce Secretary Gina Raimondo told reporters on Saturday. “It was a very successful negotiation and we agreed on a way forward for how to face our shared challenge which is global excess capacity mainly by China.”

The deal marks a significant moment in repairing the US trade relationship with Europe, a historic ally, after Donald Trump’s disruptive presidency. The EU from the start of the tariffs in 2018 rejected the premise that production from the bloc presents a national security threat to the US.

US officials said that the deal involves so-called tariff-rate quotas, which allows countries to export specified quantities of a product to other nations at lower duty rates, but subjects the shipments above a pre-determined threshold to higher tariffs.

A US official told reporters on Saturday that the specific levels at which tariffs would apply would be announced later, and that they are in line with historic levels. The US imported 2.5 million tons of steel from the EU last year and 3.9 million tons in 2019, down from 5 million tons each in 2018 and 2017.

“The agreement, ultimately, to negotiate a carbon-based arrangement on steel and aluminum trade addresses both Chinese over production and carbon intensity in the steel and aluminum sector,” National Security Adviser Jake Sullivan said.

“We are also experiencing unprecedented supply-chain disruption and we fully expect this agreement will provide relief in the supply chain and drive down cost increases as we lift the 25% tariffs and increase volume,” she said.

The deal contains agreed rules to prevent steel from China from being re-exported tariff-free to the US via the EU, the US officials said. The US and EU also agreed to negotiate a carbon-based arrangement on steel and aluminum trade and create greater incentives for reducing carbon intensity in production of the metals, they said.

The United Steelworkers union applauded the deal, saying it will help keep US industry competitive.

“It will also provide a much-needed opportunity to address the non-market predatory practices of China and other countries that have distorted global markets, while also spurring a dialogue over climate concerns stemming from countries whose industries are far more carbon intensive than those in the United States and the EU,” the group said in a statement.

The dispute started in 2018, when Mr. Trump imposed duties on steel and aluminum from Europe, Asia and elsewhere, citing risks to national security. The EU subsequently retaliated, targeting products including Harley-Davidson, Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey. With Saturday’s deal, the EU agreed to drop those retaliatory tariffs.

“Lifting this tariff burden on American whiskeys not only boosts US distillers and farmers, it also supports the recovery of EU restaurants, bars and distilleries hit hard by the pandemic,” Chris Swonger, head of the Distilled Spirits Council of the US, an industry group, said in a statement.

Jake Colvin, president of the National Foreign Trade Council, a business-lobbying group that had advocated for removal of the steel duties, said that while the agreement is a step in the right direction, the use of tariff rate quotas will still cause uncertainty for workers and businesses.

The deal “should serve to ratchet down trade tensions between the US and Europe and clear the decks for more productive and forward-looking transatlantic conversations,” Mr. Colvin said. Still, managed trade mechanisms like tariff rate quotas “undermine competitiveness, create winners and losers, add significant supply chain costs and disproportionately affect small and medium sized companies,” he said. — Bloomberg