Europe is approaching an agreement in the coming days to end the transatlantic trade war, but that ceasefire now seems likely to mean Brussels will have to accept quotas on how much steel can be shipped to the United States without paying higher tariffs.
Former US President Donald Trump sparked a trade war with Europe in 2018 by imposing tariffs on steel and aluminum imports, which he classified as threats to national security. European diplomats had originally hoped Washington would lift these duties under US President Joe Biden, but he was unwilling to do so without winning concessions to key steel industry constituencies in America.
The outlines of an agreement now seem to be forming around Europe that accepts tariff quotas. This would ensure an immediate removal of Trump-era tariffs, but would mean that high tariffs on European metal will come back into effect once EU exports exceed certain levels. EU officials had viewed such measures under Trump as blackmail, but now accept that there may be no other way out of the stalemate.
At a meeting with trade diplomats on Thursday, the EU Commission was optimistic that an agreement could be reached, said two people at the meeting. However, the diplomats did not receive any further details on a future settlement, as the commission does not want to undermine the negotiations with Washington. It is also not yet clear whether it will be a long-term solution, said the two.
The clock is ticking because Brussels and Washington have set a self-imposed deadline of November 1st to resolve their dispute. The EU’s retaliatory tariffs on American products, including countermeasures against Harley-Davidson motorcycles and bourbon whiskey, will be rolled out from Jan.
Karl Tachelet, director of international relations and foreign affairs at the EU steel industry lobby Eurofer, said the future bilateral agreement would include tariff quotas. He said: “Both partners are looking for an agreement on tariff quotas that would replace the current import tariff of 25 percent.”
Tachelet said the details are crucial for Eurofer to assess 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 that a future deal should lead to cooperation in managing global steel capacity as a whole. US Trade Representative Katherine Tai told reporters in Brussels last week that the negotiations were about more than tariffs. “I don’t want you to think that this is essentially an exercise in a Turkish bazaar where we are negotiating the price of a carpet,” she said.
The steel industry is optimistic that a deal will be found. “I would be very surprised that this would derail completely,” said Tachelet. He added that there is a lot more at stake than just steel.
“The Biden administration is interested in renewing friendlier relationships and based more on common interests than on Trump’s and confrontational approach [former U.S. Trade Representative Robert] Lighthizer administration, “he said.” So this is a context that should really generate a lot of interest and energy for a deal. “
The European aluminum lobby rejects a solution with tariff quotas and only called for a complete withdrawal of national security tariffs from the Trump era. “Any other proposed outcome would only continue to penalize the aluminum producing and using sectors on both sides of the Atlantic,” said Gerd Götz, General Director of European Aluminum.
The European Commission also insists that there was no legal basis for these obligations.
“As a trustworthy ally of the US, the EU cannot be seen as a security threat to the US,” said a commission spokesman on Thursday. “These Trump tariffs have to go.”
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