EU-U.S. Race to Finalize Steel Deal to Avoid 25% Tariff

• The agreement aims to avert the reimposition of U.S. tariffs on steel and aluminum.
• The EU has suspended retaliatory tariffs on U.S. goods like bourbon and motorcycles.

The European Union and the United States are nearing a pivotal trade deal on steel and aluminum. This deal comes ahead of the October 31 deadline, when the U.S. could reimpose a 25% tariff on steel and 10% on aluminum. The agreement aims to establish a framework for imposing tariffs on non-market-based excess capacity, particularly from China. It would also ensure the continued suspension of EU retaliatory tariffs on products like Harley-Davidson motorcycles, bourbon whiskey, and power boats.

Heightened trade tensions drive the urgency behind these negotiations. European steel and aluminum exporters face the potential reimposition of 25% and 10% tariffs, respectively. European officials are also concerned about the U.S. Inflation Reduction Act and urge for terms on critical minerals similar to the recent U.S.-Japan trade agreement. That deal allows electric vehicles using Japanese critical minerals to qualify for U.S. tax credits.

European automotive exports to the U.S., valued at €39.2 billion in 2022, are a significant part of the overall trade relationship. A finalized deal could bring crucial relief to the steel and aluminum sectors. Nevertheless, failing to achieve parity with Japan's trade terms on critical minerals may leave European exporters at a disadvantage.

In preparation for stalled talks, the European Commission has signaled it would reimpose its retaliatory tariffs. These tariffs target sensitive U.S. imports, including Harley-Davidson motorcycles, bourbon whiskey, and power boats. The contingency plan highlights the significant stakes of these negotiations, as the outcome will likely have lasting effects on trade balances and transatlantic economic relations.