The US and the EU have decided to put an end to their trade spat until after the election.
The EU’s response on commodities including motorcycles and whisky, along with US tariffs on steel and aluminum, will be halted until the end of March 2025.
On the pretext of national security, they were first enforced during the administration of Donald Trump.
However, during Joe Biden’s presidency, they were put on hold.
By deferring, President Biden will be able to maintain the support of his EU allies.
For a home audience, however, he will come out as tough on trade because they have been halted rather than eliminated.
Jobs in the US metal industry are found in states like Pennsylvania and Ohio, which may be important to President Biden in the November 2024 election.
- US places metal tariffs on important alliesDuty-free EU imports for US goods go into effect.WTO claims trade laws were broken by Trump’s steel tariffs.
According to Brad Setser, a trade expert at the Council on Foreign Relations think tank in Washington who has also worked on trade policy for the Biden administration, “this has always been the obvious deal” in the absence of a comprehensive resolution to their issues.
He stated that “returning to open conflict isn’t in the interest of the US or the EU,” particularly in light of the fact that Russian and Ukrainian production has mostly been shut out of international markets.
In 2018, Mr. Trump levied tariffs of 25% on steel and 10% on aluminum that entered the US from the EU. He used Section 232 of the law as justification for the action, citing concerns about national security.
“If you don’t have steel, you don’t have a country” was his statement at the time.
The EU imposed duties on US-made products including denim, bourbon whiskey, and Harley Davidson motorcycles as payback.
Although he has supported the tariffs, President Biden declared in 2021 that his administration will start allowing “limited volumes” of metals made in the EU into the US in 2022.
While the US replaced the Section 232 tariffs with a quota system last year, the EU postponed its measures until December 31, 2023. As a result, tariffs remain in effect for EU steel and aluminum that exceed the limit.
The World Trade Organization (WTO) declared last year that the taxes violated international trade agreements.
The US government vehemently disagreed with the decision at the time and declared that it would not be repealing the measure. It stated that it was “committed to preserving US national security by ensuring the long-term viability of our steel and aluminium industries” .
If President Trump is elected president of the United States in 2020, he has already suggested imposing fresh 10% tariffs on all goods entering the country.
Chief economist at US investment bank JP Morgan, Bruce Kasman, told the BBC that a trade war’s resurgence would be “significant” due to the possible effects on corporate confidence, if not the tariffs themselves.
The most recent suspension has been hailed by EU Trade Commissioner Valdis Dombrovskis as giving European businesses stability and trust.
“It provides us with the necessary space to continue pursuing the full and permanent removal of 232 tariffs on EU exports, as well as working on addressing global overcapacity and decarbonisation of steel and aluminium industries” .
Under the terms of the agreement, 3.2 million metric tons of steel produced in the EU may be imported annually under a tariff-free quota.
But the US really purchased 3.8 million tons last year, which led to levies of €293 million (£252 million).
2022 saw the US levy duties totaling €42 million on 64,000 tons of aluminum imports from the EU, out of a total of 289,000 metric tons.
The UK was one of the nations that consented to the US tariffs on aluminum and steel being waived.
Carbon dioxide output
In an attempt to address the issue of dumping—the practice of nations selling metal they no longer require to other nations at a price below cost—a global agreement on the production of steel and aluminum has been spearheaded by the US and the EU.
Since both metals contribute significantly to carbon emissions, if an agreement can be achieved in negotiations that have already lasted more than two years, the production with the highest level of pollution would be subject to the highest tariffs.
The US Trade Representative, Katherine Tai, praised the tariff postponement with the EU, stating that it gave time to finish intricate negotiations.
“Our goal is to forge a forward-looking arrangement that will allow us to join forces economically to incentivize fair and clean production and trade in the steel and aluminium sectors” , she stated.
The Biden administration has not once refuted its desire for changes to international trade regulations, particularly WTO dispute settlement procedures. It hasn’t, however, provided a lot of information on the specifics of those improvements.
It indicates that there are low hopes for the WTO’s big conference in February, which is set to take place in Abu Dhabi.
Speaking last week, French Trade Minister Olivier Becht stated that “it’s important to be prepared in case it’s not possible to save the system”.
