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Tariffs

EU Proposes Tariff Hike and Renegotiation of WTO Bindings to Protect Steel Industry

Strategic Insights

— 2 min read

As the first Trump administration imposed tariffs on steel imports into the United States, the EU responded by imposing rebalancing duties on US products and adopting safeguard measures to protect the EU steel industry from excess steel capacity. The eight-year period of protection under the WTO Safeguards Agreement ends in June 2026, prompting the EU to propose halving the tariff rate quotas and increasing duties to 50% ad valorem from June 2026. This move is aimed at protecting the EU steel industry from the US tariffs, which have been maintained and increased under the second Trump administration.

Key Takeaways:

  • The EU proposal involves halving the tariff rate quotas and increasing duties to 50% ad valorem from June 2026, in line with the US approach of negotiating under threat of draconian measures.
  • The EU is also proposing to renegotiate its WTO tariff bindings for iron and steel products under Article XXVIII GATT, allowing for modifications of tariff bindings following negotiations with the WTO Member with which the binding was originally negotiated.
  • The renegotiation process is likely to be complex and lengthy due to the large number of tariff lines involved and the prevalence of trade defence measures and preferential agreements.
  • The EU would need to invoke the bilateral safeguard clauses in its free trade agreements with partners, such as the UK-EU Trade and Cooperation Agreement (TCA), in order to apply the proposed new regime to free trade partners.
  • The proposed regulation sets the scene for negotiations within the EU and internationally, but the future of international steel trade is not easy to predict due to the potential reactions of other steel-producing countries.
  • The Commission's proposal appears to envisage a permanent change to international trade in steel products, with a potentially long-term regime in place.

Statistics:

  • 50% ad valorem tariffs on steel products imposed by the US.
  • 25% ad valorem tariffs applied by the EU as rebalancing duties on US products.
  • 50% ad valorem tariffs proposed by the EU from June 2026.
  • 8 years - the maximum period under the WTO Safeguards Agreement for safeguard measures to be imposed.
  • 2026 - the year by which the eight-year period of protection ends under the WTO Safeguards Agreement.
  • 2 years - the period of review for product scope, with a review of effectiveness every 5 years.

Sources:

  • "United States Imposes 25% and 10% Tariffs on Steel and Aluminium Products, Respectively" - US Customs and Border Protection.
  • "EU Steel Tariffs: A Chronology" - European Steel Association.
  • "WTO Safeguards Agreement" - World Trade Organization.
  • "Article XXVIII GATT" - General Agreement on Tariffs and Trade.
  • "UK-EU Trade and Cooperation Agreement (TCA)" - European Union.

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