US, EU seek to extend steel truce amid stalemate on longer fix

The US and European Union are haggling over terms to extend a truce on steel and aluminum trade to avoid the possible return of billions of dollars in tariffs on transatlantic commerce, as talks on a more lasting agreement this year have stalled.

The Biden administration has proposed prolonging the status quo until the end of 2025 — well clear of the US presidential elections in November next year — to hammer out a permanent deal. The EU wants a commitment to fixing what it argues is an imbalance in the current arrangement before agreeing to an extension, according to people familiar with the matter.

The debate comes as talks on the so-called Global Arrangement on Sustainable Steel and Aluminum, or GSA, reached a stalemate, said the people, who spoke on condition of anonymity to discuss private talks. The differences remain significant after last month’s failure to conclude a political agreement at a summit in Washington, and officials now are running out of track to reach a comprehensive deal before a year-end deadline.

The GSA was meant to reflect a renewal in EU-US trade relations after four turbulent years during the Trump administration. Instead, it has become symptomatic of a growing list of unresolved irritants and grievances on economic matters as the US heads into another election cycle in which Donald Trump is leading in polls to return to the White House.

The pursuit of a metals accord is aimed at settling a Trump-era dispute sparked by tariffs on European imports on the grounds they posed risks to American national security. Brussels scoffed at that justification and responded with retaliatory measures. The dispute resulted in tariffs on as much as $10 billion in transatlantic trade. 

The two sides reached a temporary truce in 2021, which expires at year-end, to provide time to negotiate the GSA.

As part of the temporary arrangements, the US partly removed the Trump measure and introduced a set of tariff-rate quotas, or TRQs, above which duties on the metals are applied, while the EU froze all of its restrictive measures. That has created an unbalanced situation that has favored the US, the bloc’s trade chief has previously said.

While the quotas are meant to be based on historical trade flows, their rigidity has meant that about one-fifth of European steel continues to be subject to tariffs.

A key EU ask is that it wants the US to replace the current system, which comprises dozens of both quarterly quotas and categories of steel, with annual quotas in order to better reflect historical flows, some of the people said.

Separately, the US Commerce Department manages a program that provides for exclusions when a US importer says that it can’t source steel domestically and needs to ship it in from abroad. The EU also wants guarantees that access to that provision will be maintained as a presumption that exclusions are granted and not become more opaque with clauses that provide less certainty, the same people said.

Another person said the EU wanted automatic approval of all exclusion requests and the US could not provide that without first considering domestic producers’ views. The person said that moving to an annual system of quotas would significantly change how the TRQs work and result in the effective removal of duties for the EU. That person added that maintaining the truce as is would be the simplest solution.

The US Trade Representative’s office declined to comment.

EU diplomats were briefed on the status of GSA negotiations last week, including on the procedure needed to prolong the truce, Bloomberg previously reported.

In a statement, the European Commission said both sides agree on most aspects of the GSA and that the priority now is to “find a way forward that works for both sides.” 

The US had said that the two sides are both committed to avoiding a return of the tariffs. One of the people noted that some EU duties snapping back into place should not be ruled out given that several members of the 27-nation bloc were growing frustrated at the lack of progress at addressing the current asymmetry.

The aim of the GSA is to tackle global excess capacity and carbon emissions of dirty metals. Some progress had been made on the first of those two goals. Any agreements would also be open to like-minded countries.

The EU has been long pushing the US to provide a clear path to remove the tariffs and TRQs. That — along with differences on tackling dirty steel and the accords’ compliance with international trade rules — remain key roadblocks to a broader GSA deal.