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Customs Barriers Between the United States and Europe: Difficult Negotiations Begin

While US President Donald Trump announced the introduction of protectionist measures on steel and aluminum, Europe is worried about the consequences of this decision and is starting negotiations in Brussels.

It was in early March that the United States announced the imposition of 10% and 25% respectively on imported aluminum and steel. The US president said he would save the European Union tariffs on steel and aluminum if it gave up its own barriers to US products.

Undeniably, these taxes will have an impact on steel and aluminum production in Europe, because beyond the decline in sales, European producers fear a destabilization of the whole market, as well as a considerable loss in terms of employment. In fact, more than 5 million tons of steel are exported by Europe each year to the US industry. In 2017, Europe exported 5.3 billion euro of steel and 1.1 billion euro of aluminum to the United States. These protectionist measures, if they are confirmed, would cost around 3 billion euro a year for European companies.

Toward this trade war, Europe is facing a united front and despite the official announcement of the Trump administration to grant the EU an exemption[1] until May 1st, European heads of state declared at the European Council on March 23, that Donald Trump’s decision was “unacceptable”. EU Trade Commissioner Cecilia Malmström has already warned, “we have recently seen how protectionism is used as a weapon to threaten and intimidate us. But we are not afraid and we will defend ourselves against bullies”, she said. In this context, she traveled to Washington earlier this week to meet with US Secretary of Commerce Wilbur Ross and Trade Representative Robert Lighthizer.

The power struggle between Europe and the United States is far from over. The negotiations currently taking place in Brussels are difficult and the EU does not seem ready to make concessions to Trump. For his part, Jean-Claude Juncker said that an agreement for the next five weeks was “not very realistic given the scope of the issues to be addressed”. While the Twenty-Eight plead for the continuation of the dialogue with the United States, they also support the European Commission’s efforts to ensure the preservation of European interests, while reserving the right to respond to US measures in an appropriate and proportionate way, in accordance with the rules of the World Trade Organization (WTO). However, it appears that the substance of the problem, namely surplus productions of steel, especially in China, does not really find a solution, implying de facto the exacerbation of the imbalance between supply and demand in the iron and steel sector.

[1] In addition to the EU, Argentina, Australia, Brazil, Canada, Mexico and South Korea are also exempt from taxes until May 1st 2018.


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