The European Union (EU) is setting the stage to mitigate the resurfacing of Trump-era metal tariffs and to alleviate the backlash on the U.S. Inflation Reduction Act (IRA) alongside its green subsidies for electric vehicles. This move comes ahead of a pivotal summit hosted by U.S. President Joe Biden, welcoming European Commission Chief Ursula von der Leyen and European Council Head Charles Michel this Friday. The summit, although brief, aims to bolster transatlantic accord concerning Ukraine and pivotal economic agendas.
A cornerstone of the economic discourse is a joint statement poised to address the global overcapacity of steel and aluminium, propelling the narrative towards sustainable production. Amidst the alloyed tensions, Washington has nudged Brussels to take a stance against Chinese steel producers specifically, as a bargain to steer clear from reinstating the Trump-era tariffs on EU steel and aluminium. The clock ticks towards an end-October deadline to harmonize the metallic discord.
“Washington has asked Brussels to move against Chinese steel producers in particular in return for avoiding the re-imposition of Trump-era tariffs on EU steel and aluminium, with an end-October deadline to reach an agreement.”
The transatlantic dialogue isn’t devoid of hurdles. A consensus among EU nations is requisite for any deal to crystallize. Last week’s congregations underscored a unified insistence that any measures should be in harmony with World Trade Organization (WTO) rules. These global trade tenets thwart the imposition of tariffs on third countries like China, prior to a meticulous investigation pinpointing excessive subsidies or dumping, a narrative the U.S. has been anchoring.
Transitioning to greener pastures, the two sides are also navigating the maze to synchronize the EU’s carbon border tariff system with the U.S. blueprint to green its economy via subsidies. The crux of the contention lies within the IRA, which has ruffled EU feathers due to its local content prerequisites. For instance, a US$7,500 tax incentive awaits U.S. consumers purchasing electric vehicles, albeit with a catch—the final assembly must be on North American soil. Additionally, half of this tax reprieve is tethered to the extraction and processing of critical minerals within the borders of nations having a free trade pact with the U.S.
The summit’s horizon also holds promise for a pact on critical minerals—cobalt, graphite, lithium, manganese, and nickel—a narrative that could potentially buoy EU suppliers. A glance at the fiscal tapestry reveals that EU exports to the U.S. of these minerals or products chiefly composed of them amassed to a significant €3.5 billion (US$3.7 billion) in 2022, as per Eurostat data.