European steel makers are bracing themselves for the full force of U.S. steel and aluminium tariffs — and a potential trade war — as a deal on exemptions for the EU, Canada and Mexico fell through ahead of a Thursday midnight deadline. The EU has expressed its strong disappointment and announced plans for retaliatory measures.
On Thursday, U.S. Commerce Secretary Wilbur Ross announced that the exemptions would be allowed to lapse, meaning EU steel makers exporting to the U.S. would face tariffs of 25% and aluminium producers 10%.
The U.S. represents a major market for EU steel producers. For Tata Steel Europe, the U.S. accounts for 10% of its sales. “The EU believes these unilateral U.S. tariffs are unjustified and at odds with World Trade Organisation rules,” Jean-Claude Juncker, President, European Commission, said on Thursday.
“This is protectionism, pure and simple,” he added.
“The U.S. now leaves us with no choice but to proceed with a WTO dispute settlement case and with the imposition of additional duties on a number of imports from the U.S.
“We will defend the Union’s interests, in full compliance with international trade law.”
The U.S. tariffs are expected to be particularly injurious to the European steel sector, only just recovering from a protracted crisis.
Flooding other markets
Alongside the loss of high quality, value-added steel sales into the lucrative U.S. market, the tariffs are also likely to result in part of an estimated 20 million tonnes of steel — which would have otherwise gone to the U.S. — flooding markets elsewhere.
Tata Steel Europe urged the EU Commission to “take swift and robust action to combat the indirect effects” of the tariffs.
“We must ensure our markets are not destabilised by millions of tonnes of steel being diverted away from the U.S. and into Europe,” Henrik Adam, chief commercial officer of Tata Steel in Europe, said in a statement.
“The steel that doesn’t go to the U.S. has to go somewhere, and it won’t just happen equally around the world,” Gareth Stace, director of UK Steel, said. “Much of it will come to the EU because we are still very open and a liberalised trading block.”
“With some half billion dollars of steel exported from the U.K. to U.S. last year, U.K. steel producers are going to be hit hard,” he added.
“Throughout these talks, the U.S. has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU,” said Cecilia Malmstrom, EU Commissioner for Trade.
“This is not the way we do business, and certainly not between long-standing partners, friends and allies. Now that we have clarity, the EU’s response will be proportionate and in accordance with WTO rules.”
During an OECD trade forum in Paris on Wednesday, Mr. Ross had criticised the EU for blocking trade negotiations because of the tariffs issue, pointing to China which he said had continued to negotiate on a trade deal.”
Europe felt that “legitimate exports” from the EU to U.S. markets did not justify tariffs, David O’Sullivan the EU’s Ambassador to the U.S. told a discussion held by the Wilson Centre in Washington DC on Wednesday. “Most of the time as I travel around I get confirmation these are high quality high value steel imports,” he said, adding that in many cases these were products that couldn’t be obtained in the U.S. “We don’t understand the logic of this.”
Following the U.S.’s surprise announcement of the tariffs on steel and aluminium earlier this year, the European Commission warned of the possibility of retaliatory action in the forms of tariffs on U.S. imports to Europe such as on Harley Davidson bikes, and Levi’s jeans.
