The bottom line is that the traditional Atlantic allies are working together again on common interests.
From a trade perspective, the deal that the Biden administration reached on steel and aluminum tariffs with the European Union generated more ambiguity than clarity. The agreement rolled back tariffs on both sides, ostensibly striking a blow for freer trade. But the deal includes more protectionist than free-trade elements, which is why U.S. tariff advocates were more effusive about the deal than free traders.
The administration itself has emphasized that the agreement advances a common climate-change agenda and a push back on China. On November 12, the administration announced a similar initiative in which the U.S. and Japan will be discussing those same issues. Viewed through those lenses, the agreement advances more of a political, than a trade, agenda.
The EU deal, announced on October 31, partially resolves a trade war started by former President Donald Trump, whose administration imposed, in 2018, a 25% tariff on steel and a 10% tariff on aluminum imported from the EU, on the basis that these were national security threats. EU exports to the U.S. subject to these Section 232 measures declined from 5.1 million tons in 2018 to 2.4 million tons in 2020. In response, the EU imposed “rebalancing measures,” hitting $3.2 billion in United States exports—including steel, aluminum, bourbon, motorboats, motorcycles, blue jeans, corn, and peanut butter—with retaliatory tariffs.
Under the agreement, which will go into effect January 1, the Section 232 tariffs remain in place, but the U.S. will allow $5.5 billion of EU steel and $1.2 billion of EU aluminum exports to come in tariff free. That translates to around 3.3 million tons of steel coming in under quota, 1.7 million tons less than was imported before the Trump tariffs, and 384,000 tons of aluminum.
Pushback on China Steel Exports
Supporters of the agreement saw it as pushback against cheap steel from China and protection for American jobs. Kevin Dempsey, the president and CEO of the American Iron and Steel Institute, an interest group representing the domestic industry, hopes that the deal represents the beginning of “a common action plan for challenging” China’s industrial policies and steel overcapacity.
Tom Conway, the president of United Steelworkers International, also supported the deal because it caps duty-free imports. “The deal creates certainty for domestic producers of steel and users who are unable to find domestic supplies,” he said. That’s true as long as the quota is enough to satisfy domestic demand for EU imports, which is debatable.
But Richard Chriss, president of the American Metals Supply Chain Institute, criticized the deal for not withdrawing the administration’s national security threat determination for EU steel imports. He also slammed the EU for implicitly accepting “the U.S. determination that EU steel in some quantities continues to be a threat to U.S. national security.” The deal, he concluded, “leaves in place a regime that has raised the cost…
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