Heated Steel Tariff Battle: Trump's Bold Move Pushes EU to the Brink of Retaliation
Trump Unveils New Steel Tariff Decision: Could This Be the Final Straw? - Is Trump's fresh steel tariff declaration an escalation over the brink?
It seemed like a glimmer of hope was within reach for the EU, as the escalating trade clash with the USA seemed mediable. However, US President Donald Trump just announced a staggering increase in the existing tariffs on steel and aluminum imports from 25 to 50 percent, right in the midst of ongoing negotiations. Could we be witnessing the start of a full-blown trade war? Let's unpack this latest development.
Why does this move catch us off guard?
As it appeared lately, even Donald Trump might have been open to a mutually beneficial solution to the trade dispute. Following his threats toward the EU with a new, drastic increase in tariffs at the end of last week, he agreed to a conversation with EU Commission President Ursula von der Leyen for the first time on Sunday. Afterwards, Trump rescinded the threat, making it clear that negotiations would continue until July 9. This goodwill gesture gave renewed momentum, reported the EU Commission.
Since then, there have been numerous phone calls between trade representatives on both sides. Most recently, EU Trade Commissioner Maros Sefcovic spoke with US Trade Minister Howard Lutnick on Friday.
How has the EU reacted to this announcement?
The EU Commission, responsible for the tariff negotiations, expressed profound disillusionment on Saturday. The increase in tariffs undermines ongoing efforts to resolve the dispute at the negotiation table, declared a spokesperson. The EU is prepared to respond swiftly and could potentially escalate before July if necessary.
How might the EU's prompt response look?
The governments of the EU member states have already paved the way in April for initial counter-tariffs ranging from 10 to 25 percent in response to the new tariffs ordered by US President Donald Trump. These could theoretically be implemented immediately and impact manufacturers of jeans, motorcycles, beef, or citrus fruits in the USA. Further measures are under consideration, such as additional duties on industrial and agricultural products like cars, sweet potatoes, and whiskey.
What motivates Trump with these tariffs?
Trump intends to rectify perceived trade imbalances and secure production sites in the USA by implementing these additional costs on imports. He explained his position during a speech to employees of a steel plant in Pennsylvania on Friday.
Kevin Dempsey, president of the American Iron and Steel Institute, welcomes the doubling of the tariffs on steel imports. Chinese steel exports have more than doubled since 2020, he stated. Under the current harsh international conditions, the tariff measure will help prevent a new surge in imports that would harm American steel producers and their employees," Dempsey added. The revenue generated from these tariffs will also aid in financing Trump's expensive tax cuts to an extent.
Formally, the existing tariffs on the import of steel, aluminum, and cars are justified by the US government as a means of ensuring national security. However, the EU finds this rationale inconsistent with the rules of the World Trade Organization (WTO).
What might the consequences of these tariffs be for the EU?
The European steel industry feared, from the beginning of the year, that more production capacities and jobs would have to be slashed due to new US tariffs. At the time, the USA was the second-largest export market for European steel producers, accounting for 16% of total EU steel exports, according to Eurofer, the European Steel Association.
Germany's largest steelmaker, Thyssenkrupp Steel, however, remained relatively composed at the time. The company in Essen pointed out that its primary market for steel is Europe. Exports of steel products to the USA were merely negligible, it claimed.
Could the EU find common ground with Trump over steel?
Theoretically, the EU and the USA could agree to join forces in tackling massive overcapacities on the global market driven by hefty subsidies. China is mostly blamed for this overproduction. European companies suffer greatly from dumping prices. Consequently, the European Commission has created a system of protective measures for the domestic steel industry, which was recently enhanced in the spring.
- EU
- Steel & Aluminum Tariffs
- Trade War
- Countermeasures
- US-EU Negotiations
- Trump Administration
- Protective Measures
- Steel & Aluminum Industry
- Overcapacity Crisis
- Global Market
- Subsidies
- Dumping Prices
Enrichment Data:- Public Consultation: The EU has launched a public consultation on potential countermeasures to U.S. tariffs on automotive, reciprocal, and aluminum products, considering additional import duties on products that amount to €95 billion in U.S.-originating imports.- Export Restrictions: The EU is also contemplating restrictions on its own exports to the U.S., impacting products like scrap metals and chemicals, which cover €4.5 billion in EU exports.- Resumption of Paused Countermeasures: The EU had paused its countermeasures on April 14 to facilitate negotiations. However, in response to the U.S. tariff increase, the EU is prepared to re-initiate these measures, signaling a readiness to escalate trade tensions if negotiations falter.
- The EU's countermeasures, initially paused due to the ongoing negotiations, could be reinstated in response to the US's increase in steel and aluminum tariffs, resulting in potential retaliation that might escalate the trade tensions.
- As the steel and aluminum tariff battle intensifies, the EU is actively considering enriching its protective measures by implementing additional import duties on products from the USA, amounting to €95 billion, and contemplating export restrictions on items such as scrap metals and chemicals, thus impacting €4.5 billion worth of its exports to the USA.
