Dismantling a Ticking Time Bomb for Trans-Atlantic Trade, EU Suspends Retaliatory Tariffs on U.S.-Origin Goods

On May 17, 2021, the European Union announced a temporary suspension of $3.8 billion worth of retaliatory tariffs on U.S. goods that were to go into effect on June 1, 2021. The announcement directly impacts a wide range of U.S. goods — including iron and steel products; apparel, textile, and footwear; and agricultural products — all of which would have been subject to additional ad valorem duties ranging from 10% to 50%.

Background

On March 8, 2018, then-President Trump issued two presidential proclamations imposing global tariffs of 25% on steel imports and 10% on aluminum imports in connection with investigations initiated by the Department of Commerce pursuant to Section 232 of the Trade Expansion Act of 1962.

In response, the European Commission passed an implementing regulation imposing ad valorem duties of 10% or 25% on $3.2 billion worth of U.S. goods. Per the regulation, however, a “second stage” of ad valorem duties ranging from 10% to 50% was slated to go into effect on June 1, 2021, for a host of U.S.-origin goods, including but not limited to:

• Iron and steel products
• Apparel, textile and footwear
• Motorcyles
• Water vessels
• Makeup
• Agricultural products (processed and non-processed)
• Whiskey and tobacco products

By suspending the scheduled tariff hikes (albeit for an indeterminate period), the EU is laying the groundwork, according to a Joint EU-U.S. Statement, for the two sides to discuss possible solutions as to “how the U.S. and EU can address excess [steel and aluminum] capacity, ensure the long-term viability of our steel and aluminum industries, and strengthen our democratic alliance.” Per the Joint Statement, these bilateral discussions — which will be led by European Commission Executive Vice President Valdis Dombrovskis, U.S. Secretary of Commerce Gina Raimondo and U.S. Trade Representative Katherine Tai — represent a mutual desire to work “expeditiously [to] find solutions before the end of the year.”

Scope of Potential Resolution

Although unmentioned in the Joint Statement, EU-U.S. discussions over the Section 232 tariffs will coincide with ongoing discussions between the U.S., EU and the United Kingdom surrounding the decades-long trans-Atlantic dispute related to the Airbus-Boeing aircraft subsidies.

As noted in our previous client alert on March 5, 2021, the United States and the EU announced a four-month suspension of tariffs emanating from the Airbus-Boeing dispute (one day after an identical announcement between the U.S. and the UK). The subject suspensions — which impact a wide array of products previously subject to ad valorem duties ranging from 15% to 25%, including airplanes and other civil aircraft — were viewed by many as a crucial step in the Biden administration’s effort to shore up the U.S.-European alliance for purposes of, among other things, tackling global issues of mutual interest (including, but not limited to, climate change and economic competition with China).

During recent congressional testimony, Ambassador Tai expressed her belief that a long-term resolution of the aircraft subsidy dispute is “within reach” — and potentially before the four-month “freeze” period expires in July. She also noted the “enormous opportunity” for rebuilding the U.S.-European alliance through a strengthened trade relationship, along with the Biden administration’s commitment to the same.

Despite these recent statements, at this juncture it remains unclear whether the EU-U.S. talks will lead to a complete removal of the Section 232 tariffs against EU steel and aluminum products and the corresponding retaliatory tariffs on U.S.-origin goods, let alone a long-term resolution to the aircraft subsidy dispute. That being said, for those in favor of eliminating trans-Atlantic trade barriers, the May 17 announcement is certainly a step in the right direction.

For More Information

In the months ahead, the bilateral trade discussions between the EU and the U.S. are expected to garner significant global attention. 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.