At the EU-USA summit, the transatlantic relationship will be put to the test. There will soon be a threat of new punitive tariffs in the trade dispute – and there are also differences in the US climate support program IRA.
As difficult and depressing as the geopolitical situation is after the Hamas terrorist attack in the Middle East and in view of the war in Ukraine, at least the transatlantic partnership is holding up. Reaffirming the unity between Washington and Brussels – that will be an important message from today’s summit in Washington, explains an EU diplomat in advance. It is becoming more difficult to prove that the transatlantic friendship does not stop with money. Because trade issues are explosive.
Punitive tariffs: the clock is ticking
The punitive tariffs imposed on Europe by US President Joe Biden’s predecessor Donald Trump in 2018 have not been lifted, but have only been suspended: 25 percent on steel imports, ten percent on aluminum imports. If there is no solution by the end of the month, the measures will take effect again – as will the EU counter tariffs on Harley motorcycles and bourbon whiskey.
Both sides apparently want to suspend the punitive tariffs again in order to continue working on a long-term regulation. Negotiators work on details until the very end. The issue of steel tariffs is still being discussed in preparation for the summit, US Treasury Secretary Janet Yellen said in Luxembourg at the beginning of the week. The deputy head of the EU Commission, Valdis Dombrovskis, who is responsible for trade issues, spoke of “significant progress in the negotiations,” but also of some rifts that still need to be bridged. The aim is a global steel and aluminum agreement.
Compatible with World trade rules?
This agreement would allow both sides to demand taxes from countries that rely heavily on fossil fuels to make steel – such as China. As a condition for waiving its punitive tariffs, the US government expects the Europeans to join the front against Beijing.
Washington proposes that the EU take joint action against overcapacity on the steel market. A transatlantic club against highly subsidized aluminum and steel plants in third countries – the chairman of the trade committee in the EU Parliament, Bernd Lange (SPD), takes a critical view of this: “I think this is a dangerous path, because then we are unilaterally on board with the USA “But of course this will annoy many other trading partners, not just China.”
According to Lange, the EU and especially Germany are more dependent on global trade than the USA. Europe therefore has a particularly great interest in complying with WTO rules. According to an EU diplomat, EU states are also pushing for a regulation that is compatible with the requirements of the World Trade Organization. According to them, unlike the USA, the EU cannot impose direct punitive tariffs. One possibility would be for Brussels to initially initiate anti-subsidy proceedings, as it did with Chinese electric cars.
EU anger over the “Inflation Reduction Act”
The “Inflation Reduction Act” also continues to cause unrest. With this billion-dollar program, the US government wants to promote green technologies. From an EU perspective, European companies are disadvantaged. EU manufacturers of electric cars are excluded if they do not source raw materials for the batteries from North America. The EU wants to give European companies access to US funding by establishing a raw materials club.
According to trade expert Lange, both sides must make an effort to open further doors: “One door will be an agreement on raw materials, which we can probably at least conclude with a political agreement at the summit.” The pressure to find such an agreement is high: given the tense world situation, neither the Americans nor the Europeans need further trade disputes.