US-EU Trade War May Be Resurfacing Yet Again - Bloomberg.com

A long-standing trade dispute between the United States (US) and the European Union (EU) over steel and aluminum imports is threatening to reignite, potentially leading to the re-imposition of significant tariffs on European goods. The US has indicated it may reinstate tariffs if an agreement on a "Global Arrangement on Sustainable Steel and Aluminum" (GASSA) is not reached by the end of the year, raising concerns for importers and trade compliance professionals.

This situation traces back to 2018 when the Trump administration imposed Section 232 tariffs of 25% on steel and 10% on aluminum imports from various countries, including the European Union, citing national security concerns. In 2021, the US and EU reached a truce, suspending these tariffs and establishing a tariff-rate quota (TRQ) system. Under this system, a specific volume of EU steel and aluminum can enter the US tariff-free, but imports exceeding this quota are subject to the Section 232 duties. In return, the EU suspended its retaliatory tariffs on various US products. This truce, initially set to expire at the end of 2023, was extended to December 31, 2024. The current US threat stems from the ongoing negotiations for GASSA, which the US views as crucial for combating carbon-intensive production and overcapacity, particularly from China. However, the EU has expressed reluctance to agree to GASSA, citing concerns about its potential protectionist nature, discriminatory aspects against non-market economies, and compatibility with World Trade Organization (WTO) rules.

Who is Affected and What Rates/Dates Apply?

Should an agreement not be reached and the US proceed with its threat, importers of steel and aluminum products from the European Union would be directly impacted. The tariffs that could be reinstated are 25% on steel products and 10% on aluminum products. The critical date for these developments is December 31, 2024, when the current truce is set to expire. If no agreement on GASSA is reached by this date, these tariffs could potentially be re-imposed starting January 1, 2025. Furthermore, a US re-imposition of tariffs could prompt the EU to reinstate its own retaliatory tariffs on various US goods, which previously included items such as Harley-Davidson motorcycles, bourbon, and Levi's jeans, creating a broader impact on trade between the two blocs.

What Importers Should Do

Given the potential for significant tariff changes, importers and trade compliance officers should take proactive steps:

• Monitor Developments Closely: Stay informed on the progress of US-EU negotiations regarding the Global Arrangement on Sustainable Steel and Aluminum (GASSA) and any official announcements from the US Trade Representative (USTR) or the Department of Commerce.
• Assess Supply Chains: Identify all products currently imported from the European Union that contain steel or aluminum, or that could be subject to potential EU retaliatory tariffs if the situation escalates. Understand the origin and value of these goods.
• Evaluate Potential Cost Increases: Calculate the financial impact of a 25% tariff on steel and a 10% tariff on aluminum for your specific imports. Factor these potential costs into your budgeting and pricing strategies.
• Consider Mitigation Strategies: Explore alternative sourcing options, review existing contracts, or investigate duty drawback programs and other trade remedies that might be applicable if tariffs are reinstated.