Policymakers seek to end steel tariffs
As talks continue to end US steel tariffs introduced under the last administration, lobbying by US steelmakers has created additional friction for policymakers in Europe and Washington hoping to secure a deal.
The current steel tariffs were introduced by President Trump in June 2018, imposing a 25% tariff on European steel and 10% on aluminum for national security reasons. Unpopular in much of the steel industry, they nonetheless gained support from American steelmakers who experienced a boost as income rose.
“There appears to be a growing momentum behind the removal of some of the tariffs on steel and aluminum, but US steel producers may be able to prevent their lifting. Talks between the United States and the EU can only lead to the lifting of steel and aluminum tariffs by the United States on European producers, but not a total lifting of tariffs. The Biden administration is trying to solidify relations between the United States and Europe and a lifting of steel and aluminum tariffs in Europe would be another olive branch that could be proposed, ”told Breakbulk Matthew Bey, Senior Global Stratfor Analyst at RANE.
The EU has challenged tariffs since they were first brought forward and, following failed negotiations with the Trump administration, took the case to the World Trade Organization before proceeding. impose tariffs on approximately $ 7.8 billion of U.S. exports, including Bourbon whiskey. , peanut butter and orange juice.
Felix Schoeller, general manager of breakbulk line AAL Shipping, agrees momentum is now positive for a deal, telling Breakbulk that “From a political point of view, President Biden is likely to cut or remove tariffs. of EU steel. During his presidential campaign, President Biden made it clear that he would strike the right balance between Trump’s all-out trade war and an indiscriminate free trade agreement. Furthermore, President Biden has stressed more than once that his priority is to ensure that the United States maintains its position as the most powerful economy in the world – something can only be done with trade deals. healthy with other leading markets.
Despite pressure from steel producers, the launch of President Bidens’ proposed budget of $ 6 trillion, the largest in U.S. history, hinges on significant infrastructure spending, requiring significant increase in steel for general merchandise demand and demand for steel.
“Steel prices in the United States have more than tripled since last year and this has become a significant threat to Biden’s ambitious infrastructure plans, which are so greedy for steel,” adds Schoeller. “So far, Biden has only strengthened existing ‘Buy American’ laws since his inauguration, which have already benefited the US steel vertical as well as other major sectors like infrastructure.”
Philip K Bell, president of the US-based Steel Manufacturers Association, praised the president’s plans, but stressed the importance of “strong domestic sourcing preferences that help ensure that the steel used in the infrastructure of our country is made by Americans for Americans and is melted down and poured here and not abroad ”.
While the tariffs were originally introduced as part of Trump’s policy of boosting American manufacturing, the steel shortage and the resulting rise in costs caused by the outbreak of the global pandemic last year have reinforced opinions and raised questions about the source of the shipments.
“The COVID-19 economic crisis has been exacerbated by high steel and aluminum tariffs for steel and aluminum-intensive industries, slowing their recovery, while it has obviously helped the takeover of steel producers. There would have been a lot of lobbying from US industries to remove tariffs on steel and aluminum if President Trump loses the 2020 election regardless of the pandemic and the pandemic has only given more weight. ammunition to the anti-fare crowd, ”Bey explains.
In addition to squeezing the margins of U.S. manufacturers, which import intermediates, the pandemic has also heightened the urgency for Biden to provide a solution to consumers, who have seen substantial price increases across the board, and to break the market. current shortage of supply.
“The drastic increases in steel prices in the US and the EU are mainly attributed to a shortage of supply. Thus, export opportunities to the United States are open for steel from South Korea (on the basis of quotas rather than tariffs) and Japan (which has long-term agreements with American customers). With the increase in Covid cases in India, steel exports to the EU are expected to be higher than expected. China’s steel exports are expected to fall as authorities attempt to curb rising commodity prices, ”Schoeller notes.
One of the key factors in the initial tariff implementation – the ongoing trade war between the United States and China – however, is expected to continue unabated, regardless of the outcome of talks with the EU.
“Despite the likely pivot of steel tariffs with the EU, we expect the current high US tariffs on Chinese imports to remain the same,” says Schoeller.
UK calls for de-escalation
Following its withdrawal from the EU in January, the UK is also reviewing its steel trade with the US, which falls under the same Section 232 tariffs. Last week, the UK government launched a consultation on rebalancing measures in response to tariffs on steel and aluminum.
“We now have the power to shape these tariffs to reflect UK interests and fit our economy. The UK will do whatever it takes to protect our steel industry from illegal tariffs which could undermine UK industry and hurt our businesses. Ultimately, however, we want to defuse these disputes so that we can move forward and work closely with the United States on issues such as WTO reform and tackling unfair trade practices. non-market economies, ”said Liz Truss, UK Secretary for International Trade.
The UK consultation period will last for six weeks until early July, while US and EU trade officials hope “to find solutions before the end of the year”.
“In the long term, the demand for bulk commodities for steel cargo will be determined by many factors other than steel tariffs, including overall US economic activity, decarbonization / lightening of various industries, the pace of economic recovery from COVID-19 around the world, and the health of the US manufacturing sector, ”Bey concludes.
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