Brussels has reacted to US action on steel by imposing its own tariffs

Brussels has reacted to US action on steel by imposing its own tariffs

Tariffs of up to 25% imposed by the European Commission (EC) on the import of a number of steel products following Washington's decision to levy its own surcharge, have been heavily criticised by the European Automobile Manufacturers' Association (ACEA).

Brussels-based ACEA said it "strongly regrets" the introduction of provisional measures to curb steel imports into the EU, approved by the EC, following a safeguard investigation by the Commission in response to US restrictions on steel and aluminium.

The provisional outcome of this procedure is the introduction of 'tariff-rate quotas,' based on the average imports of different types of steel during the past three years. A 25% tariff will be applied to all imports which go beyond these quotas.

"Car makers source 94% of automotive steel in Europe, so the EU steel industry is a vital partner for us," said ACEA Secretary General, Erik Jonnaert. "However, these measures will be damaging to our competitiveness, as they will lead to steel price increases in the EU market, where prices are already very high."

ACEA also noted it regretted the Commission had not taken into account demand for steel is increasing across many sectors, including automotive. The EU steel industry's capacity utilisation for automotive grades of steel is already very high, with ACEA insisting car manufacturers are consequently suffering from long lead times due to lack of capacity.

The tariffs – described by the EC as "provisional safeguard measures" - will address the diversion of steel from other countries to the EU market as a result of the US tariffs. The safeguard measures came into effect on 19 July, although traditional imports of steel products will not be affected.

The measures were not subjected to European Parliamentary scrutiny, but were rather approved by Member States who gave authority to the EC to act on their behalf.

Trouble has been brewing for some time since President Trump fixed the European steel industry in American crosshairs, but the EC is keen to point out the tariffs are not aimed at Washington, rather they are intended as a bulwark should steel which otherwise finds itself uncompetitive in the US attempt to flood Europe. 

"There is no vote from the European Parliament - [these are] executive powers," an EC source told just-auto from Brussels. "It is EC Executive Competencies - this is done with the control of Member States. It is a special committee - the Trade Defence Committee. Member States are consulted and have the power to block it - it [tariffs] was unanimously approved.

"It was relatively quick and this was because for steel, since 2016 we have a kind of monitoring. Because of global over-capacity and to ensure the function of the European steel sector - the EC was already looking at this since 2016.

"At that time we introduced import surveillance. The data was available and the investigation process started. We are not imposing taxes on everything which comes into Europe; we are keeping the market open [and] it is in line with WTO rules."

The EC is adamant it had no other choice than to introduce provisional safeguard measures to protect its domestic industry against a surge of imports. These measures insists the Brussels body, ensure the EU market remains open and will maintain traditional trade flows.

"The US tariffs on steel products are causing trade diversion, which may result in serious harm to EU steelmakers and workers in this industry," said Trade Commissioner, Cecilia Malmström.

"I am convinced they strike the right balance between the interest of EU producers and users of steel, like the automotive industry and the construction sector, who rely on imports.

"We will continue to monitor steel imports in order to take a final decision by early next year, at the latest."

The provisional measures concern 23 steel product categories and will take the form of a Tariff Rate Quota (TRQ). For each of the 23 categories, tariffs of 25% will only be imposed once imports exceed the average of imports during the last three years.

The quota is allocated on a first come first serve basis, thus at this stage not allocated by individual exporting country. These measures are imposed against all countries, with the exception of some developing countries with limited exports to the EU. Given the close economic links between the EU and the European Economic Area (EEA) countries (Norway, Iceland, and Liechtenstein), they have also been exempted from the measures.

These exclusions are compatible with both the EU's bilateral and multilateral Word Trade Organisation (WTO) obligations maintains the EC.

The provisional safeguard measures can remain in place for a maximum of 200 days. All interested parties will now have the opportunity to comment on the findings of the investigation so far.

The Commission will take these comments into consideration in order to reach its final conclusion, at the latest by early 2019. If all conditions are met, definitive safeguard measures may be imposed as a result.