Deadline Approaches for U.S.-EU Steel and Aluminum Deal: What You Need to Know

The United States and the European Union (EU) are facing an impending deadline of October 31 to finalize a Global Arrangement on Sustainable Steel and Aluminum. This deal aims to prevent a renewed transatlantic trade war and address challenges related to global excess capacity and carbon emissions in metals production. Let’s explore the key points from the article to understand the current situation between the two trading partners.

In 2018, the Trump administration imposed tariffs on steel and aluminum imports from various countries, including EU member states. In response, the EU retaliated with targeted duties on a range of U.S. exports. However, in October 2021, the Biden administration reached an agreement with the EU to replace the Section 232 tariffs with a system of “tariff-rate quotas,” allowing duty-free imports of EU-made metals up to a historical trend level.

Negotiations and Broad Goals:
The ongoing negotiations aim to go beyond this agreement and tackle the larger issues of global excess capacity and carbon emissions in the metals industry. Both Washington and Brussels aim to discourage trade in emissions-intensive steel and aluminum products and ensure domestic policies support lowering greenhouse gas (GHG) emissions intensity. The ultimate objective is to extend this approach to other major players in metals production.

EU’s Carbon Border Adjustment Mechanism (CBAM):
The EU has implemented the Carbon Border Adjustment Mechanism (CBAM), which subjects goods manufactured within Europe to a carbon price set under its Emissions Trading System. Non-European imports are expected to face tariffs through CBAM, starting in 2026. The U.S. has been pressing for exemptions for its exports from the CBAM.

Current Status and Challenges:
Although the U.S. and EU negotiators appear to be engaging constructively, a comprehensive agreement is unlikely to be reached by the October 31 deadline. The U.S. International Trade Commission has been conducting an investigation to assess the emissions intensity of steel and aluminum produced in the U.S., with the report expected to be submitted to the U.S. Trade Representative by January 2025. This indicates that the challenges regarding global overcapacity and carbon emissions will require more time and effort to address.

Importance of Avoiding a Trade War:
While a grand bargain may not be achievable in the short term, it is crucial to prevent a renewed transatlantic trade war. The earlier Section 232 tariffs imposed by the U.S. had significant costs for American manufacturers, consumers, and businesses. A U.S. International Trade Commission study highlighted that although steel production increased, downstream industries experienced a decline due to the tariffs. Tariffs may benefit specific industries but impose broader costs on the overall economy.

As the deadline for the U.S.-EU Steel and Aluminum Deal approaches, there is cautious optimism that a trade war will be averted. However, challenges related to global excess capacity and carbon emissions in the metals industry will require further attention. The U.S. Chamber of Commerce remains engaged in representing the priorities of its members. Stay tuned for updates on the progress and implications of this crucial negotiation.


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