The European Union and the United States have agreed to extend the suspension of their trade disputes until after the presidential election.
US tariffs on steel and aluminium, along with the EU’s retaliatory tariffs on products like motorcycles and whisky, will remain suspended until the end of March 2025.
These tariffs were initially imposed during Donald Trump’s presidency on national security grounds but were put on hold under President Joe Biden’s administration.
The extension of this suspension is seen as an effort to maintain good relations with EU allies. However, it also allows President Biden to project a tough stance on trade for his domestic audience, as the tariffs have not been completely abolished.
The US metal industry plays a significant role in states like Pennsylvania and Ohio, which could be pivotal in the November 2024 election.
The US imposed a 25% tariff on steel and a 10% tariff on aluminium imports from the EU in 2018, citing national security reasons. In retaliation, the EU imposed tariffs on various US-made goods.
President Biden has supported these tariffs but indicated in 2021 that limited volumes of EU-produced metals would be allowed into the US from 2022.
Last year, the EU suspended its tariffs until December 31, 2023, while the US replaced the Section 232 tariffs with a quota system, subjecting EU steel and aluminium above the quota to tariffs.
The World Trade Organization (WTO) ruled last year that these tariffs violated global trade rules. The US government rejected the ruling, emphasizing its commitment to preserving national security and the domestic steel and aluminium industries.
President Trump has even mentioned the possibility of imposing new 10% tariffs on all US imports if he wins the upcoming presidential election.
Bruce Kasman, Chief Economist at JP Morgan, highlighted that the re-emergence of a trade war could significantly impact business confidence, even if not due to the tariffs themselves.
EU Trade Commissioner Valdis Dombrovskis welcomed the extension, as it provides stability and confidence to European companies. It also allows for 3.2 million metric tons of EU-made steel to be imported into the US annually under a tariff-free quota.
Carbon emissions have been a concern for the US and EU, leading them to negotiate a global deal on steel and aluminium production addressing climate change and dumping practices.
The US Trade Representative Katherine Tai sees the tariff suspension as an opportunity to work together to incentivize fair and clean production and trade in these sectors.
However, the lack of a global deal and a permanent solution on bilateral tariffs reflects a broader issue in international trade talks. The Biden administration has expressed a desire for reform in global trade rules, including the WTO, but specific details have yet to be disclosed.
Expectations for a significant meeting of the WTO in Abu Dhabi in February are low, and concerns about the possibility of saving the system persist, as expressed by French Trade Minister Olivier Becht.
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