EU and US join forces to probe Chinese steel and aluminium, tariffs possible

The European Union is gearing up to investigate excess capacity in China's steel industry, potentially leading to a 25 per cent tariff being imposed on imports from the second-largest global economy. Furthermore, aluminium is under scrutiny within the EU, with officials considering a 10 per cent tariff on shipments from China and other non-market economies.

This investigation forms part of a political accord with the United States, which is set to be unveiled during an upcoming bilateral summit in Washington next week. The agreement will also involve the removal of specific existing US tariffs on steel and aluminium imports from the EU. Sources within the EU who are familiar with the plan anticipate its announcement on October 20 by US President Joe Biden, European Commission President Ursula von der Leyen, and European Council President Charles Michel.

The potential agreement, which remains under negotiation, aims to relieve European companies from the tariffs imposed by the US on steel and aluminium during the Trump administration.

Simultaneously, without explicitly naming Beijing, an investigation will scrutinise non-market economies suspected of subsidising their industries. China would be among the countries falling into this category.

This dual approach by Brussels seeks to address Chinese subsidies that have disrupted the global metals industries while resolving the remnants of the trade war initiated by the Trump administration in its dealings with transatlantic partners.

Additionally, this agreement would allow EU and US policymakers to focus on the intricate aspects of the EU's carbon border tax. The specifics of how US steel companies would navigate this mechanism, where European importers would pay duties corresponding to the emissions generated during production, have yet to be decided.

Although the "club approach" to steel and aluminium tariffs is anticipated to eventually welcome other "like-minded partners," no third countries are expected to join immediately, according to one source.

However, this move is likely to provoke the displeasure of China, which has cautioned Brussels against taking action that could impact its steel industry.

As trade tensions between the EU and China continue to escalate, there is growing anticipation of new tariffs being imposed. These potential tariffs would be in addition to the existing EU tariffs that have already been levied on certain Chinese steel products.

Furthermore, the European Commission has initiated an investigation into subsidies within China's electric vehicle sector, mainly due to a substantial increase in imports from a previously low level.

Additionally, there has been some discussion among several European commissioners about the possibility of launching a separate investigation into Chinese-manufactured wind turbines. However, according to two sources, this will unlikely happen in the near future.

Customs data for the first eight months of 2023 indicate a decrease in EU imports of Chinese wind turbines. As a result, there needs to be more enthusiasm within specific commission segments to open another contentious issue with Beijing.

On the other hand, some individuals are suspicious that China may provide subsidies for wind turbine components. The European Union's competition chief, Didier Reynders, recently mentioned on French television that there could be components in the wind energy sector that might compete with Chinese counterparts.

Reynders stated, "If there is a possibility of excessive assistance from the Chinese side, we could initiate an investigation, much like we did with electric vehicles."

An EU official noted that the situation is intricate, and the bloc needs more evidence. Nevertheless, the official cautioned that such an investigation remains a plausible course of action.

In a panel discussion just before heading to China for a series of meetings, EU Energy Commissioner Kadri Simson declined to rule out the possibility of a probe, stating, "We should never dismiss the possibility."