EU hunts for formula to avert deeper US trade conflict

EU flags blowing in front of building

May 22, 2018 - The European Union scrambled to come up with a strategy to avoid U.S. tariffs on foreign steel and aluminum, signaling a readiness to accept American import quotas and to slash some EU duties in return for a permanent waiver. 

With an EU exemption from the metal levies due to lapse on June 1, European Trade Commissioner Cecilia Malmstrom indicated that U.S. quotas on steel and aluminum from the bloc would be acceptable as long as they “totally respect the historical flows.” Malmstrom also said the EU was willing to discuss cuts in European import levies on industrial goods such as cars.

“I don’t think the exemptions will be prolonged,” she told reporters on Tuesday in Brussels outside a meeting with trade ministers from the 28-nation EU. “We have to prepare for different scenarios.”

The EU is seeking to translate political pledges to stand up to U.S. President Donald Trump’s protectionism into policy proposals that both threaten retaliation and offer routes away from any economically damaging trans-Atlantic trade war.

New Trade Talks

The balancing act was on display last week at a European summit in Bulgaria, where EU President Donald Tusk criticized the “capricious assertiveness” of the Trump administration while national government leaders quietly gave Malmstrom scope to negotiate an agreement with the U.S. over the metal tariffs.

More generally, the EU is countering Trump’s “America First” agenda by pushing for free-trade accords with a range of countries around the world. In the latest development on that front, the bloc’s trade ministers on Tuesday gave Malmstrom mandates to start market-opening negotiations with Australia and New Zealand.

Since Trump imposed the metal duties on national-security grounds in March while offering temporary waivers to some trade partners, the EU has said the levies of 25 percent on steel and 10 percent on aluminum are illegal under global rules and demanded a “permanent, unconditional” exemption.

The bloc has threatened, without a permanent exclusion, both to complain to the World Trade Organization and to impose tit-for-tat duties on a range of U.S. goods. In a possible initial retaliatory step outlined last week, the bloc would apply a 25 percent levy as of June 20 on 2.8 billion euros ($3.3 billion) of imports of American products including Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey.

Last year, the EU exported 5.3 billion euros of steel and 1.1 billion euros of aluminum to the U.S. In terms of volume, the steel exports amounted to 3.4 million metric tons of finished products and 1.5 million tons of semi-finished goods and other types including wires and tubes.

Time Running Out

Economy Minister Peter Altmaier of Germany, the EU’s biggest steel exporter to the U.S., said both sides must seek ways to avert a wider trans-Atlantic commercial conflict.

“We want to avoid a trade war,” Altmaier told reporters on Tuesday in Brussels. “It’s important for jobs in Europe and Germany that we reach an agreement that takes into account the interests of both sides. Time is running out.”

Malmstrom said she has been speaking to U.S. Commerce Secretary Wilbur Ross “several times a week” in a bid to reach a deal and “we have no clarity yet.”

On April 30, when Trump prolonged an initial five-week waiver for the EU from the metal tariffs for a final 30 days, the White House said it’s focused on quotas in order to “restrain imports, prevent trans-shipment and protect the national security.”

Source: Bloomberg