The U.S. and the European Union have reached an interim agreement to amend the tariff structures on U.S. aluminum and steel imports from the EU, a move that many in the industry see as relief for domestic manufacturers and a platform from which carbon emissions can be addressed.
While the 10 percent aluminum and 25 percent steel tariffs remain in place under Section 232 of the 1962 Trade Expansion Act, each will revert to a tariff-rate quota based on historical amounts of aluminum and steel that entered the U.S. from the EU in recent years (the historical periods are different for steel and aluminum).
The agreement with the EU follows more than a year of skyrocketing materials and shipping costs resulting from the global COVID-19 pandemic, and offers relief and support for American companies, according to Gina Raimondo, U.S. Department of Commerce secretary.
The measures take effect Jan. 1, 2022.
"In the past year, the cost of steel used by America's auto and appliance manufacturers has more than tripled, creating increased costs for consumers," Raimondo said in an Oct. 31 statement. "Today's news will provide much-needed relief for those workers and industries, the workers and businesses ... and American consumers, who are worried about increasing prices."
While President Joe Biden's administration is touting the tariff restructuring as a long-awaited panacea for domestic manufacturers, others say the amended tariff enforcement is "not a game-changer."
"The tariff adjustments help, but the net tonnage [in the agreement for steel] is about 3.3 million metric tons," said John Anton, price and purchasing director for London-based IHS Markit. "The U.S. market [domestic plus imports, less exports] is well over 100 million tons, so this is 3 percent or less additional supply.
"[This is] helpful, but not a game-changer," he said.
Under the agreement reached Oct. 30, the U.S. will allow a basic overall level of steel and aluminum imports, which will measure up to an historical average of product coming from the EU. Above this level, steel imports still will be subject to the 25 percent tariff, and aluminum imports still will face the 10 percent tariff.
In addition, the agreement eliminates any such threat of retaliatory tariffs by the EU, up to 50 percent was threatened in some cases, in response to the tariffs implemented under the umbrella of national security by the Trump administration in 2018.
"The Trump administration stretched what it considered national security grounds in imposing the tariffs back in 2018," said John Mothersole, also a price and purchasing director at IHS Markit.
U.S. Trade Representative Katherine Tai said Oct. 31 that the agreements help "repair relationships."
"In addition to the EU eliminating the retaliatory tariffs against the United States, we have agreed to suspend the [World Trade Organization] disputes against each other related to the 232 disputes," she said. "With this dispute behind us, we are in a stronger position to addresses global overcapacity from China with an enhanced enforcement mechanism to prevent leakage of Chinese steel and aluminum into the U.S. market."
According to the agreement, the aggregate annual import volume of steel under the tariff-rate quota is set at 3.3 million tons under 54 product categories and allocated on an EU member-state basis, and in line with the 2015-17 historical period.
The aggregate annual import volume of aluminum under the TRQ is set at 18,000 metric tons for un-wrought aluminum under two product categories, and 366,000 tons for semi-finished (wrought) aluminum under 14 product categories. The import volumes will be allocated on an EU member-state basis in line with the 2018-19 historical period.
There are exceptions for derivative products for both materials that are not subject to tariffs.
The 232 tariffs apply to all aluminum and steel imports from the EU, except for a selection of countries where exceptions were initially negotiated (for aluminum, these were Argentina, Australia and subsequently Mexico and Canada under the USMCA).
"Our understanding is that negotiations with Japan and South Korea are ongoing," Mothersole said.
Anton said details on these ongoing negotiations are scant, but could mimic the tariff negotiations recently concluded with 27 member-states of the EU.
"Much Japanese steel is covered by anti-dumping (and) countervailing duties that are completely independent of Section 232," Anton said. "Some rates are prohibitively high, so relief on Section 232 is unlikely to lead to a surge in Japanese steel to the United States."