EU to extend trade truce with US until after presidential election

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The EU is set to extend its truce with the US over steel tariffs imposed by Donald Trump until after presidential elections next year.

European trade commissioner Valdis Dombrovskis told the Financial Times he was in favour of postponing the reimposition of retaliatory tariffs on American goods such as bourbon whiskey and Harley-Davidson motorbikes. Washington had also agreed to suspend its levy on steel and aluminium, and the two sides continue to work towards solving the years-long dispute, he said.

“We are focusing . . . on the extension of the current suspension of tariffs on the US side and our retaliatory tariffs.”

The EU suspended its tariffs in October 2021 as part of a deal with the Biden administration, but they would automatically be reapplied on January 1 unless Brussels takes an explicit decision to delay them. Dombrovskis expected EU governments to approve the proposal, which the European Commission will send them next week.

“It’s safe to assume that we will be arriving at this decision before the end of the year.”

He declined to say how long the tariffs would be suspended, but people with knowledge of the situation said it would be 15 months.

The existing system, however, was “not ideal”, the commissioner said. “We do not want to prolong it too long because this imbalance is to our disadvantage.”

Under the 2021 agreement, Washington lifted the Trump-era tariffs on European steel and aluminium but introduced tariff-free quotas instead. EU exporters pay about €350mn annually on metal exceeding the quota.

EU officials say they are aware of President Joe Biden being reluctant to permanently lift the tariffs before elections as he fights for votes in steelmaking states such as Ohio and Pennsylvania.

Brussels and Washington are continuing talks to set up an international “green steel” club that would impose tariffs on carbon-intensive manufacturers in other countries while exempting their own.

However, that plan is proving difficult to agree on as the EU already charges companies for their greenhouse gas emissions, while the US does not. Brussels is introducing a carbon import tax in 2026 that would hit the US and others.  

Dombrovskis admitted “there was no clear pathway” for the US to introduce emissions trading. “We cannot expect any movement before elections.”

The commission is, however, considering keeping pressure on the US by reviving a World Trade Organization case against the steel tariffs. 

“Our goal is to permanently eliminate US tariffs . . . on EU steel and aluminium exports,” said a commission spokesperson. The tariffs were “incompatible” with the US’s commitments in the WTO and “we are considering . . . to resume our WTO case”, they added.

In a separate case brought by China at the WTO dispute panel in December, the tariffs were found to be illegal. Washington called the judgment “flawed” and is appealing against it. But the case is stuck as the US has blocked the functioning of an appellate body.