Europeans suspend tit-for-tat tariffs on steel and aluminum for up to six months

The European Union and the United States agreed on Monday to pursue talks to end their dispute over steel and aluminum tariffs, with the EU suspending retaliatory measures in the hope Washington reciprocates during US President Joe Biden's visit to Brussels next month.

Biden is scheduled to hold a summit with EU leaders in June. It will be his first trip to Brussels since taking office in January.

A joint statement by the EU and US on Monday said European Commission Executive Vice-President Valdis Dombrovskis, US Trade Representative Katherine Tai, and US Secretary of Commerce Gina Raimondo announced the start of talks to address excess capacity in global steel and aluminum.

It said they acknowledged in a virtual meeting last week the need for effective solutions that would preserve their critical industries. They agreed to chart a path that ends the WTO disputes following the US application of tariffs on imports from the EU under Section 232, the powerful trade weapon authority given under the US Trade Expansion Act of 1962.

The trade dispute started when former US president Donald Trump decided to impose punitive tariffs in March 2018 on steel and aluminum from the EU and other countries entering the US. The European Commission estimated the 25 percent tariffs on steel and 10 percent tariff on aluminum affected 6.4 billion euros ($7.8 billion).

In retaliation, the EU quickly slapped tariffs on US imports of steel, aluminum and whiskey and expanded them to motorcycles and orange juice worth 2.8 billion euros.

It also took the case to the World Trade Organization and vowed additional tariffs of 3.6 billion euros in three years time to match the US measures if there is no positive outcome at the WTO.

Dombrovskis said on Monday the EU will temporarily suspend the increase of its rebalancing measures. "This gives us space to find joint solutions to this dispute &tackle global excess capacity," he said in a tweet.

The US will still maintain its tariffs despite the EU's call for a suspension of up to six months.

'Strong gesture'

Bernd Lange, a German member of the European Parliament who chairs its international trade committee, said it's understandable the EU does not increase tariffs right before the EU-US summit and called it a "strong EU gesture".

"I expect US to come with tangible commitment during summit. If not, no reason not to impose counterbalancing tariffs," he said in a tweet.

Hosuk Lee-Makiyama, an economist and director of the European Centre for International Political Economy based in Brussels, said it is not an agreement but a prelude to renewed engagements in time for the coming EU-US summit by using tariffs as a deterrent, adding it is similar to how the Trump administration forced the EU, Japan, Republic of Korea and other supposed allies by threatening Section 232 tariffs on cars.

"Brussels is merely trying to force the Biden administration to remove the steel and aluminum tariffs," he told China Daily.

"However, whether you are dealing with Beijing, Brussels or Biden, a trade negotiator must be prepared to use both sticks and carrots to persuade a counterpart. Biden administration is unlikely to clean up Trump's protective measures without some serious additional concessions from Brussels," he said.

Ute John, head of Trade and Sustainability at Daimler AG EU Corporate Representation, described the development as "good news".

"But: US 232 steel and aluminum#tariffs need to be removed finally," she said in a tweet.

In a letter to Raimondo in March, the Coalition of American Metal Manufacturers and Users, representing more than 30,000 US manufacturing firms, complained about the continuing ineffectiveness of Trump's Section 232 tariffs on steel and aluminum imports.