Tariff test for EU as Trump prepares to squeeze trade partners

Unlock the White House Watch newsletter for free

Your guide to what the 2024 US election means for Washington and the world

A frozen trade dispute over steel has become an early test of the EU’s relationship with the incoming Trump administration, with a senior US official saying Brussels should consider postponing plans for March to impose billions of dollars of extra tariffs on imports from the US.

President Joe Biden had reached a truce with the EU in a conflict sparked when Donald Trump put tariffs on steel and aluminium in 2018, but each side is due to reimpose its duties on the other next year, the EU from the end of March and the US at the end of 2025.

“The Commission really has to make a choice — March 2025 is not long after the inauguration,” said Rufino Hurtado, senior trade representative at the US mission to the EU. 

“It is entirely up to the EU to decide what happens in 2025 regarding these retaliatory tariffs — whether to again extend the suspension or allow them to snap back,” he said.

The re-elected Trump has threatened tariffs of between 10 and 20 per cent on all EU imports and attacked the bloc for selling more to the US than it buys from it.

Under the Biden deal, the US replaced the 2018 tariffs of 25 per cent on steel and 10 per cent on aluminium with a quota system, while the EU suspended its retaliatory duties on US goods.

Hurtado told a conference in Brussels that although the EU and US “were closer than ever” on most issues Brussels had stalled progress in talks over the past three years. The two agreed to set up a “green steel club” in 2021 when pausing the dispute. 

The idea was to agree environmental standards so as to prevent cheap Chinese metal made with fossil fuels from flooding the US and EU markets.

Hurtado said the US had put forward “ambitious” proposals but they “were not aligned with EU objectives”.

EU trade commissioner Valdis Dombrovskis has said the proposed Arrangement on Sustainable Steel and Aluminium (GSA) must be in line with multilateral trade rules, and EU officials said the US plan, which favours domestic producers, would probably break WTO rules. 

Brussels wants to base the green steel club on its own carbon border adjustment mechanism (CBAM), which will levy tariffs on imports according to how much carbon they emit from 2026. That will hit US steel too, as the country has no national carbon pricing system.

Meanwhile EU producers are still paying around $300mn annually for metals exports in excess of the US quotas introduced to solve the stand-off.

The EU is scheduled to reimpose tariffs on €4.8bn of US imports from March 31, including 50 per cent on bourbon whiskey, Harley-Davidson motorcycles and motor boats, if there is no further postponement. 

Lower levies would cover a range of goods including some steel, aluminium and agricultural products and playing cards.

“We are aiming to find a solution to this issue,” said an EU official, who declined to be named. “But the situation is unbalanced as our exporters are still paying some tariffs. We want to resolve it in the interests of both sides.”

The Commission declined to comment.

This story has been updated to correct the categories of goods to be subjected to EU tariffs at lower rates