EU-US Steel and Aluminum TRQs Can Adjust With Demand; Negotiations Begin on Climate-Oriented Trade

However, that quota is not as small compared with historic volumes as it might appear. Because while the European Union exported almost 5 million metric tons of steel to the U.S. in 2017, before the 25% tariff was imposed, there have been exclusions to the tariffs for EU producers that total 1.1 million metric tons, according to a top EU trade official, Bloomberg reported. Also, the U.S. is fully rolling back the tariffs on derivative products. The exclusions will continue through the end of 2023 for all who have them, with no need to reapply.

The EU framed this as providing for trade to return to historic levels, after declining by half due to the tariffs. And EU Trade Commissioner Valdis Dombrovskis said, "These discussions were far from easy and this solution is not perfect. But it means we can move on from one of the most visible irritants imposed by President Trump.

"During the next two years we will work towards a global steel arrangement, which would allow us to remove 232 tariffs for good."

He was referring to the fact that the EU and the U.S. agreed to work on negotiations on trading steel and aluminum in a way that would restrict market access for countries that do not meet standards of lower carbon intensity in metal production.

It is not yet decided whether aluminum and steel will have separate arrangements on the questions of the impact on climate, the EU said.

Those negotiations, which are open to any country that wishes to produce cleaner metals, are aiming to wrap up within two years, which would get them done before the EU begins taxing imported metals from countries that do not match the EU climate ambition. At a press conference in Rome, EU President Ursula von der Leyen said: "It is a big step forward in fighting climate change. The arrangement is, of course, open to all likeminded partners."

A joint statement said that not only would they arrive at "a common methodology for assessing the embedded emissions of traded steel and aluminum," they also would "ensure that domestic policies support the objectives of the arrangements and support lowering carbon intensity across all modes of production." But, the joint statement said, they would consult on government spending for private firms that are moving to decarbonize mills.

They also said that they pledge to restrict access to their markets for countries that are contributing to non-market access capacity, including through antidumping or countervailing duties.

The Alliance for American Manufacturing praised the fact that the tariff rate quotas can adjust downward if demand drops, and also the melted and poured requirement. Steel products made in the EU but with imported semi-finished steel inputs cannot qualify for the TRQ, which is important to domestic steel advocates, who worry that dumped steel could find a back door into the U.S. in this fashion.

"It’s worth noting that nothing in the arrangement modifies the 40 or so existing anti-dumping and countervailing duty cases on EU metals, nor does it prohibit new unfair trade cases from being initiated against the EU," AAM CEO Scott Paul said.

The American Primary Aluminum Association, the group that pushed for the original Section 232 tariffs on aluminum, said after the announcement, "Of critical importance, the arrangement supports America’s primary aluminum industry by setting the quota portion of the TRQ at very low levels that are well below pre-232 volumes.”

The unwrought aluminum quota for the EU is 18,000 metric tons, which is definitely below the almost 28,000 metric tons that were exported before the tariffs came into play. But the Aluminum Association, which represents the bulk of the domestic aluminum industry, noted that the EU was not a significant exporter of primary aluminum ingot for American buyers, with only a 1% market share.

The Aluminum Association, though it argued there should be no TRQ at all on allies, noted that the average exports of wrought aluminum from the EU from 2015 to 2017 were not quite 206,000 metric tons. The TRQ for that category will be 366,000 metric tons.

A trade association of metal purchasers, called the Coalition of American Metal Manufacturers and Users, said, "It is disappointing that the agreement will not completely terminate these unnecessary trade restrictions on our allies."

Commerce Secretary Gina Raimondo emphasized that CAMMU's concerns about the sky-high prices and short supply of steel as a result of the tariffs would be resolved by the deal.

"Working with our European counterparts, we have secured a deal that will protect American jobs; avoid retaliatory tariffs on iconic American brands like Harley-Davidson and the Kentucky bourbon industry; reduce inflationary pressures on products like cars, trucks, appliances and canned goods; and alleviate a major supply chain crunch by supporting increased steel and aluminum capacity in the U.S," she said. “In the past year, the cost of steel used by America’s auto and appliance manufacturers has more than tripled, creating increased costs for consumers. Today’s news will provide much-needed relief for those workers and industries, the workers and businesses who were threatened with overwhelming retaliatory tariffs of 50% and American consumers, who are worried about increasing prices."

Raimondo was referring to the fact that retaliatory tariffs on U.S. exports were scheduled to double on Dec. 1, when they would be 50%.

This agreement does not cover the retaliatory tariffs from the United Kingdom, but the Commerce Department said they are continuing to talk with the UK about issues related to steel and aluminum.

The tariffs on Japanese steel remain in place; the Commerce Department said there are also ongoing negotiations with Japan.