EU, U.S. Announce Deal on Steel and Aluminum Tariffs

The Deal

In January 2018 the Trump administration imposed tariffs on steel and aluminum by invoking Section 232 of the Trade Expansion Act of 1962. This is a Cold War-era law that authorized the president to impose tariffs and other trade restrictions upon a determination that targeted goods are being imported into the United States “in such quantities or under such circumstances as to threaten or impair the national security.” Then-President Trump imposed these tariffs on steel and aluminum products following an investigation and determination that steel and aluminum imports threatened the U.S. national security. The measures introduced by the Trump administration included a 25% ad valorem tariff on steel imports and a 10% ad valorem tariff on aluminum imports for certain non-exempt countries.

The U.S.–EU deal is the latest in a line of bilateral deals revolving around the Section 232 tariffs. In the years since the levying of the tariffs, certain countries have agreed deals with the U.S. For instance, Australia, Canada and Mexico are entirely exempted from the tariffs while Argentina, Brazil and South Korea have agreed absolute quotas for their steel and aluminum exports.

As part of the EU deal, the U.S. has announced that from January 1, 2022, it will no longer apply the Section 232 tariffs on a certain amount of EU exports of steel and aluminum (so called “tariff rate quotas” or “TRQs”). The amount of TRQs will be calculated with reference to the historical volumes of EU steel and aluminum exports to the U.S. This means that the EU will be able to export, without tariffs, up to 3.3 million metric tons of steel, 18,000 metric tons of unwrought aluminum and 366,000 metric tons of semi-finished aluminum to the U.S. Any EU exports above these volumes will be subject to the same 25% ad valorem tariff on steel and 10% ad valorem tariff on aluminum.

In return, beginning January 1, 2022, the EU will suspend its rebalancing measures against the U.S. that were introduced in June 2018. The measures targeted U.S. origin goods including (but not limited to): iron and steel products, apparel, textile and footwear, motorcycles, water vessels, makeup, agricultural products (both processed and non-processed), whiskey and tobacco products. As stated in our update from May 2021, the EU had already suspended a planned increase in rebalancing measures (which were set to increase on 1 December 2021). This so called “second tranche” increase will also be cancelled as part of the deal.

Both sides have also agreed to withdraw their cases challenging the imposition of the measures at the World Trade Organization.

Global Sustainable Steel Arrangement

Since the beginning of the year, both the Biden Administration and the European Union have been clear that they see the resolution of historical trade disputes as a necessary precursor to improving their overall relationship. Over the course of 2021, the U.S. and EU have agreed to solutions to the aircraft subsidy dispute and a global minimum tax deal, and they have also set up a Trade and Technology Council.

The deal easing steel and aluminum tariffs was accompanied by the announcement of a new “Global Sustainable Steel Arrangement.” The Arrangement is a new initiative that has the aim of decarbonizing the steel and aluminum industries while at the same time addressing the “issue of overcapacity in these industries caused by non-market practices in some economies”. The EU and U.S. will begin negotiations on the Arrangement soon and aim to conclude them in two years. Both sides envisage that other like-minded countries will also join the Arrangement.

Participants in the arrangement will have to facilitate trade in steel and aluminum so that the products meet relevant standards for low-carbon intensity. Signatories will also have to refrain from “non-market practices” to support the steel and aluminum industries. 

The United Kingdom has also indicated that, following the U.S.–EU deal, it is “committed to addressing both global steel overcapacity and decarbonisation”  and it is looking to reach a resolution to ease the U.S. – U.K. tariffs that are currently in place. Negotiations between the U.K. Department for International Trade and the U.S. Trade Representative will continue.

For More Information

Faegre Drinker will continue to closely monitor these developments and provide timely updates as warranted. If you have any questions about these matters, please contact any member of Faegre Drinker’s Customs and International Trade team.