The European Union and the United States have agreed to put their trade war on hold, postponing tariffs on steel and aluminium for over three years.
These tariffs, which were first imposed by the Trump administration for national security reasons, have strained the relationship between the two economic giants.
The move to suspend the trade conflict is seen as a smart move by President Joe Biden, who faces re-election next year. It allows him to keep good ties with EU allies, while also showing his toughness on trade to the American voters.
The US tariffs on steel and aluminium, which started in 2018 under Donald Trump’s presidency, triggered counter-tariffs by the EU, affecting products like motorcycles and whisky. Under President Biden, the tariffs were put on hold, but not removed, leaving room for further talks.
Brad Setser, a trade expert from the Council on Foreign Relations, said that the deal to pause the trade war is an “obvious deal” given the current global situation, especially with the reduced supply of steel from Ukraine and Russia. The aim of the deal is to avoid more tension and find a lasting solution to the trade dispute.
The World Trade Organisation had already ruled against the tariffs, saying they broke global trade rules. The new deal allows the suspension to continue, with 3.2 million metric tons of steel from the EU to enter the US without tariffs every year. However, the US imported 3.8 million tons in 2021, meaning some tariffs still apply.
The trade talks between the US and the EU also try to tackle wider issues, such as the environmental impact of steel and aluminium production. Attempts to reach a global agreement on these issues have been going on for more than two years, but no final deal has been made.
The slow progress in global trade talks shows the bigger challenges in changing global trade rules, with the Biden administration saying that the WTO’s dispute resolution system needs reforms, but not giving specific plans. As hopes are low for the next WTO meeting in Abu Dhabi, the trade relations between the US and the EU will keep influencing the direction of global trade.
