US Trade Representative Katherine Tai, US Secretary of Commerce Gina Raimondo, and European Commission Executive VP Valdis Dombrovskis have begun discussions to address the tariffs regimes for the global steel and aluminum commodities.
The discussion seeks to address excess capacity, ensure the two upstream industries’ viability, and strengthen trade between the regions. Some market participants speculate that the discussions may lead to a temporary respite in tariffs between the two regions. The break could include reductions in tariffs or the temporary suspension of tariffs on steel (25pc) and aluminum (10pc).
EU imports into the US have trended down since the application of Section 232 as have finished steel imports. Global markets are facing hyper-inflationary prices in both finished carbon steel and aluminum at present and this along with limited supplies is placing margin pressure on downstream consumers.
China recently warned domestic steelmakers and traders against price manipulation as construction consumers have started to halt projects because of skyrocketing steel prices.
In the US and EU, HRC, rebar, and plate prices have reached historical highs. Removal of trade barriers could help both the US and EU increase supplies and balance pricing. Finished steel imports from the EU tallied at about 2mn mt in 2020 compared to 4.3mn mt in 2017. Still, only about 25-30pc of US steel imports are affected by the Section 232 tariff due to exclusion applications or coverage by other trade mechanisms such as antidumping and countervailing duty decisions.
The American Iron and Steel Institute (AISI) and The US Aluminum Association have endorsed the bilateral talks. Their press releases on Monday noted that while China is the largest source of global steel oversupply, other distorting market policies including subsidies contribute to unfair trading practices towards US trade including from European players.
In March, the International Steel Trade Association (ISTA) proposed that the EU lift the import safeguards for 12 months from July 2021 to address material shortages being faced by downstream steel product producers. The US’s steel market is facing a similar dilemma as demand is far greater than supplies resulting in longer lead times and higher prices.
Secretary Raimondo had noted in March that the administration would not rapidly abolish the duties on steel and aluminum as the policies were found effective in supporting US domestic industry and limiting unfairly traded imports.