World trade: EU and USA extend standstill agreement in trade dispute

After the preliminary failure of negotiations, there was recently a threat of a renewed escalation of an old trade conflict between the USA and the EU. This risk has now been averted.

In the dispute over US special tariffs on steel and aluminum from the EU, a further escalation has been averted for the time being. As the EU Commission announced on Tuesday, a standstill agreement concluded in 2021 has been extended until March 31, 2025. It stipulates that certain quantities of steel and aluminum from the EU may be imported into the USA duty-free. In return, special EU tariffs on US products such as bourbon whiskey, Harley-Davidson motorcycles and jeans remain suspended.

The latter were imposed in retaliation for the special tariffs on steel and aluminum imports introduced by then US President Donald Trump in 2018. The Republican justified the measure “in the interests of national security.”

No agreement at summit in October

“The extended suspension of tariffs gives companies on both sides of the Atlantic security and makes trade easier,” the EU Commission said. As part of the preliminary agreement, the USA also agreed to grant additional customs exemptions for EU exporters. Overall, the agreement saved them tariffs of around 1.5 billion euros per year.

A final solution should actually be found by the end of this year. However, no agreement was reached at a summit meeting in Washington in October. The reason given in Brussels for the failure was inadequate accommodation from the USA. For the dispute over special tariffs, the USA only wanted to accept solutions that were not in line with the rules of the World Trade Organization (WTO).

Disappointment among Europeans

European industry was disappointed by the preliminary failure of the negotiations. The German steel industry spoke of a great opportunity that had been missed. A possible return of Trump to the White House after the presidential election in November next year is considered a risk for the standstill agreement.

Figures from the EU Commission show what dimensions are involved: In 2022, around 3.8 million tons of steel were exported from the EU to the USA. 1.7 million tonnes of this could be exported duty-free due to the standstill agreement – an additional 1.5 million tonnes were exported on a voluntary basis. In the case of aluminum, around 216,000 tonnes of total exports of 289,000 tonnes were exempt from duty – but only 146,000 tonnes were exempted from tariffs under the agreement. The EU retaliatory tariffs originally affected US exports worth 2.8 billion euros.