U.S. and Europe Clash Over Trump-Era Tariffs

Date: Monday, October 16th, 2023
Source: The Wall Street Journal

BRUSSELS—The Biden administration’s relationship with the European Union, a vital geopolitical ally in a time of crisis, is being tested by a Trump-era policy on metals tariffs that the White House had sought to unwind.

Former President Donald Trump in 2018 slapped hefty tariffs on most U.S. steel and aluminum imports, citing national security as grounds. The move infuriated U.S. allies—including other members of the North Atlantic Treaty Organization—and led some to impose retaliatory measures.

The Biden administration and the EU later announced a pause in the dispute and officials are looking to negotiate a new deal by January to tackle concerns about an oversupply of steel and its climate impacts.

Reaching an agreement has proven vexing. The U.S. and EU hope to announce progress at a summit next week in Washington between President Biden and the EU’s two top officials. But people close to the negotiations said that with just days to go until that gathering, a final deal is probably unattainable before the meeting and it remains uncertain how much the leaders will be able to agree on.

According to people familiar with the talks, an eventual deal could result in the two sides extending their current tariff truce rather than settling the dispute definitively. That extension could last through the next presidential election, the people said.

Officials are determined to reach an agreement. Failure to do so could weaken efforts in both Washington and Brussels to showcase a harmonious trans-Atlantic relationship ahead of next year’s U.S. elections. That vote could prove crucial to the shape of U.S. support for NATO, the strength of European-U.S. ties and Washington’s support for Ukraine in its war with Russia.

Biden, soon after coming into office, allowed European steel and aluminum imports to enter the U.S. tariff-free as long as volumes remained below historical levels. The move was meant to signal a reset in the relationship after bumpy years between Europe and the U.S. during the Trump administration. The EU also suspended its retaliatory tariffs, which had targeted U.S. products ranging from Harley-Davidson motorcycles to bourbon whiskey.

Economic tensions between Europe and the U.S. rose again last year over made-in-America provisions attached to clean-technology subsidies in the U.S. Inflation Reduction Act, which prompted some European companies to say they might shift investments to the U.S.

Some European politicians also accused the U.S. of taking advantage of European energy shortages linked to the war in Ukraine to charge high prices for liquefied natural gas, driving up industrial costs.

In current talks on a deal, the U.S. wants the EU to impose tariffs on steel from China, which U.S. officials believe contributes to global overcapacity and undercuts U.S. producers. Washington is also reluctant to completely end its tariffs on European metals, preferring instead to seek commitments from the EU to put levies on Chinese steel in exchange for a continued suspension of the tariffs on Europe, people familiar with the negotiations said.

The EU is seeking a definitive end to the U.S. tariffs and wants any trade measures to be compliant with World Trade Organization rules, the people said.

To avoid a return to tariffs next year, the bloc may need to accept U.S. conditions that, instead of permanently ending the tariffs, Washington will extend the suspension of the duties with a pledge to remove them in future, according to the people familiar with negotiations. However, that pledge may not be met until after the U.S. presidential election.

In return, the EU would likely extend the suspension of the countermeasures that it took in 2018 against the U.S., instead of removing them, the people said.

A deal that suspends, rather than removes, U.S. tariffs could make EU member states skittish about a deal. They fear that unless the tariffs are permanently scrapped before the election, a new president could reimpose them. Trump, currently the leading candidate for the Republican nomination for next year’s election, has threatened new tariffs on imports if he’s re-elected.It seems almost certain, officials say, that next week’s summit won’t include a final agreement on the tariffs and that the two sides will instead seek to reach an interim political understanding that can work as the basis for a final deal.

The EU will then need to win member states’ approval for a negotiating mandate to hash out a deal.


To assuage U.S. pressure over China, EU officials have told Washington they are open to pursuing an antisubsidy investigation into steel that comes from nonmarket economies, people familiar with the talks said. However, they say they have rejected Washington’s push to commit to specific action against Chinese products. They say a pledge to do that would flout WTO rules.

The Financial Times reported earlier this week that the EU planned to announce an antisubsidy investigation targeting steel during next week’s summit.

Washington’s push for tariffs on Chinese steel could give Brussels some leverage. It allows the EU, which controls the timing and management of the probe, to potentially tie action on Chinese steel to the timing of U.S. action on the permanent lifting of U.S. tariffs on steel and aluminum.

A spokesman for the U.S. Trade Representative declined to comment on specific provisions being discussed, citing the confidential nature of the negotiations.

The future treatment of the so-called 232 tariffs is closely linked to the progress on an ambitious effort to create a new framework to tax imported steel based on the amount of carbon dioxide emitted during production and use that as a tool to eliminate oversupplies from China and other nonmarket economies, U.S. officials say.

Speaking at a Washington event this week, U.S. Trade Representative Katherine Tai said the administration remains “extremely committed” to the negotiations, but acknowledged it has been a “really difficult task” both technically and, on the European side, “emotionally.”

She also noted that the history of negotiating trade deals between the U.S. and Europe has sometimes ended in disappointment. “Despite our best efforts, our record has been that sometimes we seem like star-crossed lovers,” she said.

European officials say that negotiations with the U.S. trade team have proven very difficult. Some of the negotiations have been taken up by European Commission President Ursula von der Leyen’s top team in a bid to give the talks more political traction and get the White House involved, elevating those talks above trade officials.

A spokeswoman for the European Commission, the bloc’s executive body, said the EU and the U.S. are fully committed to achieving an ambitious outcome by the end of this month. She said measures would be taken in compliance with the bloc’s international obligations, including WTO rules.

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