The European Union today extended its trade truce with the United States for a further 15 months, preventing tariffs on trans-Atlantic trade worth billions of euros from kicking in automatically on January 1.
The agreement struck between Brussels and the Biden administration in October 2021 to resolve a Trump-era trade dispute over aluminium and steel was set to expire at the end of this year.
Both sides had been racing to find a solution to the dispute and avoid the reintroduction of tariffs on trade worth billions of euros but talks between US President Joe Biden and EU chiefs Ursula von der Leyen and Charles Michel in Washington in October failed to produce a breakthrough.
The newly-announced extension of the tariff suspension is set to last until shortly after the next US administration takes office.
“This important extension is the outcome of intensive engagement with the US,” Valdis Dombrovskis, the EU trade commissioner, said. “We are giving our importers and exporters the market stability and business confidence to continue to trade smoothly.”
The Trump-led administration slapped tariffs on EU steel and aluminium entering the US in 2018, claiming the foreign-made products were a threat to national security. The duties, set at 25% on steel and 10% on aluminium, hit €6.4 billion worth of trade, according to the EU executive.
In a counter move, the EU introduced retaliatory tariffs on a raft of American goods in the value of €2.8 billion entering its market, such as bourbon whiskey, Harley-Davidson motorcycles and motor boats.
The 2021 deal saw the EU temporarily lift its retaliatory tariffs, as the US allowed limited volumes of EU-produced metals to enter the United States without levies.
Despite today’s deal being hailed as a major achievement to avoid the reimposition of tariffs, the interim arrangement is still a setback for EU exporters, who continue to pay millions of euros in levies every year on trade that exceeds the tariff-free quotas.
The EU’s trade chief Dombrovskis said Monday the truce would allow both sides to “pursue negotiations for a full and permanent removal of Trump-era (…) tariffs on EU exports.”
These negotiations are focused on a so-called ‘green steel club’ aimed at taxing steel producers based on the carbon intensity of their metal. The plan has so far been at a standstill due to the European bloc’s comparatively higher threshold for environmental standards of imports.