NEWS

The U.S. and EU are racing to conclude a “Global Arrangement on Sustainable Steel and Aluminum” and avert a renewed outbreak of tit-for-tat tariffs. Here’s what is at stake.

The U.S. and the European Union face a self-imposed October 31 deadline to conclude what officials are calling a Global Arrangement on Sustainable Steel and Aluminum and avoid a renewed transatlantic trade war.   

The good news is that the tit-for-tat tariffs Washington and Brussels imposed in 2018-2021 seem unlikely to make a comeback, but the broader goals trade officials set for themselves — to address global excess capacity and carbon emissions in metals production — may remain elusive for now.  

In mid-2018, the Trump administration imposed Section 232 tariffs on steel and aluminum imports from nearly every country in the world – including close allies in Europe. The EU retaliated with targeted duties on a wide range of U.S. exports, including motorcycles, bourbon, peanut butter, and jeans.  

Seeking to calm the waters, the Biden administration in October 2021 announced a deal with the EU to replace the Section 232 tariffs with a system of “tariff-rate quotas” allowing duty-free imports of EU-made metals up to a level in line with historical trends. In return, the EU suspended its retaliation for two years. 

However, today’s negotiations aim to go much further, with Washington and Brussels seeking “to discourage trade in emissions-intensive steel and aluminum products that contribute to global non-market excess capacity from other countries and to ensure that domestic policies support lowering the GHG emissions intensity of these industries,” as the USTR has stated. To achieve these goals, the ultimate aim would have to be to extend the scheme to other major players in metals production. 

In addition, the U.S. has been pressing for its exports to be excluded from the EU’s Carbon Border Adjustment Mechanism (CBAM), which technically entered into force on October 1. The CBAM aims to ensure that goods manufactured in Europe, which are subject to a carbon price set under the EU’s Emissions Trading System, don’t face competition from imports made in countries where no similar carbon price is imposed. 

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