EU rejects US proposal to end steel tariff dispute

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The European Union has rejected a proposed US solution to end tariffs on steel and aluminium, raising fears of a renewed transatlantic trade dispute.

The two sides agreed to halt the tariff war in 2021 over measures imposed by then-US President Donald Trump, but must find a binding deal on a new “green steel” club by October.

But according to officials with knowledge of the situation, the EU believes the US’s proposed solution is likely to violate WTO rules because it discriminates in favor of domestic producers.

EU trade chief Valdis Dombrovskis is traveling to Washington next week as time runs short to make a breakthrough.

If the two sides cannot reach an agreement, the US tariffs will automatically go back into force in October – and so will EU retaliatory measures. The tariffs are 25 percent on steel from Europe and 10 percent on aluminum, while the EU measures targeted products such as bourbon whiskey and Harley-Davidson motorcycles.

While they stalled the dispute, the US and EU agreed to form a permanent steel club that would prioritize low-carbon production – a measure also aimed at reducing both sides’ reliance on Chinese imports.

The US proposal would allow club members to set emissions standards, and charge up According to media reports, those who do not meet him. To be included, governments would also have to commit not to overproduce steel and aluminium, and to limit the role of state-owned enterprises.

Instead Brussels thinks its new Carbon Limit Adjustment Mechanism (CBAM), which would charge imports according to their carbon intensity, is the right answer.

It has suggested CBAM combined with conventional trade defense equipment – ​​as the basis for a global arrangement on so-called durable steel and aluminum (GSA) – to address overproduction in this sector.

Unlike the European Union, the US has no national carbon pricing system and the Biden administration has been wary of imposing tariffs on heavy industry in states the president needs to retain in the 2024 election, including Pennsylvania, Michigan and Illinois.

It has also been reluctant to remove the tariffs, which Trump imposed on national security grounds, and has been accused of putting blue-collar jobs at risk, especially because of cheap Chinese imports.

The European Union has an emissions trading system that forces companies to buy permits to pollute, with the price of a ton of carbon reaching €90 in recent months. Its CBAM will force importers to pay the same price for seven sectors, including steel and aluminium. If the carbon price in the country of origin is low, or not.

The cease-fire established a temporary system of tariff-rate quotas, allowing the export of metals between the EU and the US with reduced duties up to a certain amount.

In return, the EU suspended retaliatory tariffs and the two sides agreed to set up a global order if the deal is to be concluded by October this year.

An agreement is expected to be signed at a possible EU-US summit around that time.

Dombrowski will also push for better treatment for the European Union under the US aid plan for electric vehicles. Washington’s Inflation Reduction Act prohibits subsidies on EVs and batteries manufactured in the US, Canada and Mexico.

But it has offered to include EU manufacturers sourcing or processing the five most common minerals for batteries. However, some EU governments are pushing to extend this arrangement to all 50 metals listed in the IRA. “We don’t know how battery technology will develop,” said an EU official.

European Commission spokeswoman Miriam Garcia Ferrer confirmed Dombrowski’s travel plans and said contact with the US was “continuous”.

He said both sides were “fully committed to achieving an ambitious outcome” for the GSA by October.

The EU wanted a “permanent solution” and “re-establishment of normal and undivided transatlantic trade in the region”.

“All of this will be done in compliance with our international obligations, such as WTO rules, as well as our domestic climate policies,” he added.

The US administration did not immediately respond to a request for comment.