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November 1, 2021 – The EU-US dispute over steel and aluminium tariffs has been paused for the time being. Agreement has been reached on a quota system for European steel exports to the United States. But are all sides satisfied with this or has the solution simply been postponed until the outcome of the next US presidential election in 2024? The European Union is doing too little to secure its raw material supply chains. And economic growth in the Eurozone is currently the highest in the world – despite bottlenecks in procurement.

Stainless Espresso: EU-US tariffs: Is everyone happy now? Or not?
Stainless Espresso: EU-US tariffs: Is everyone happy now? Or not?

EU-US tariffs: Is everyone happy now?

The alleged settlement of the EU-US dispute over steel and aluminium tariffs has shown that only an agreement on a provisional basis was reached and only a doubling of EU tariffs on US products was prevented. Both sides speak of a great success, but nothing has really changed.

Pausing the dispute, but no final agreement

So far, there is officially only talk of an agreement and a pause in the steel and aluminium dispute. The exact amount of the negotiated tariff rate quota (TRQ) for European steel producers for imports into the United States is not known.

Tariff rate quota amount still unknown

Unnamed government officials had told Reuters in advance of the official announcement that the TRQ for steel would be about 3.3 million tonnes. But that would be more than 60% less duty-free EU steel exports than when the Trump administration introduced the Section 232 tariffs in 2018. In addition, the Europeans seem to have had the Melted & Poured regulations imposed on them by the Americans. This means that only 100% steel produced in the EU27 can be exported to the US.

The European Commission said the aluminium and steel tariffs had affected around €6.44 billion in exports.

Stainless steel only marginally affected

European stainless steel is in short supply and the concern that large quantities could now be shipped to the United States is justified. However, European stainless steel producers have exported only manageable quantities to the United States in the past – even before the Section 232 tariffs. The danger of cannibalising their own business is too great. After all, almost all large North American stainless steel producers are part of European megacorporations.

But is everyone happy now?

No. The Europeans would have liked to see a complete end to Section 232 tariffs. In the end, nothing more than a tariff rate quota came out of it. This means that there is still a danger that the Biden administration will lower the quotas again in some areas for political reasons – as has already happened with Donald Trump vis-à-vis unwelcome imports from countries with TRQs. With the disadvantage that the EU can now presumably no longer impose punitive tariffs as a countermeasure.

In return, the Europeans now have the opportunity to sell galvanised steel capacities freed up by the automotive crisis to the United States. This is not likely to please the steel producers there.

Solution not until the US election year 2024?

In the end, all that was agreed upon was a common enemy: China and its overcapacities. The fact that the EU27 has the highest global overcapacities in percentage terms is often overlooked. And also that EU steel is far from being as clean as American steel. So nothing is likely to change until 2024 – before then, according to government sources, a real deal between the EU and the US will not be reached. And 2024 is another presidential election year in the United States…

Commodity crisis: Europe is doing too little to secure its supply chains

France’s Eramet Mining Group, which includes high-performance steel producer Erasteel, has told the press that if the EU stops investing in raw material supply chains for EV batteries, domestic gigafactories could be without raw materials such as nickel, lithium or cobalt from 2025. There is already a shortage of critical raw materials in many areas of the chemical industry.

Source: eramet.com

Strong growth in the Eurozone

The Eurozone left other large economic areas far behind in terms of growth in the third quarter: Economic output rose by 2.2 percent quarter-on-quarter, compared to only 0.5 percent in the USA and 0.2 percent in China. This means that only about 0.5 percent is still missing the pre-crisis level. This was reported by Deutsche Bank.

Supply bottlenecks not yet overcome

Although there are signs of an economic slowdown at the end of the year, partly because private consumption is suffering from high inflation and supply bottlenecks are slowing growth, not only in industry.

End of the upswing not in sight

Deutsche Bank analysts do not see an end to the upswing – on the contrary: the order books of industrial companies are full to bursting and there is still room for improvement in the consumption of services if the pandemic subsides.

Availability of semiconductors to rise

Growth rates should therefore pick up again already in the first half of 2022, also because the supply of semiconductors will soon increase after the end of the Corona restrictions at important Asian production locations. These are good prospects for the stock markets in the new year. The auto sector in particular should be happy about diminishing supply chain problems.

Source: deutsche-bank.de

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