Price on Trade: New EU steel tariffs don't mean the US should weaken its stance

Any steel imports into the EU that exceed the new, lower quota level would be subject to a 50% tariff, which represents a major increase from the EU’s current 25% out-of-quota tariff. This move would largely align the EU’s steel tariff rate with Canada and the United States.

The European Commission’s plan is intended to replace the existing EU safeguard measures that are set to expire in 2026. In announcing this policy shift, the Commission has stated that the new program is necessary to protect the struggling EU steel industry from global excess capacity, high energy prices, and unfair competition.

Of note, EU steel producers have seen their capacity utilization rate drop to 67%, and 18,000 steel jobs were lost in 2024 alone.

The proposed steel tariffs have been met with alarm in the UK, where the EU is the principal export market, accounting for nearly 80% of UK steel exports. It is not surprising then that UK steel industry has warned that the EU’s measures pose an “existential threat” and could lead to “perhaps the biggest crisis” the sector has ever faced.

Unlike certain non-EU countries, such as Norway or Iceland, which have exemptions from the proposed tariffs due to their integration within the single European market, the UK currently does not have a separate carve-out. UK industry leaders and government officials are calling for country-specific quotas to protect UK steel exports.

As we have commented previously, the now pseudo-nationalized UK steel industry is mired with old and excess steelmaking capacity (e.g., British Steel). It is that obsolete capacity, high energy costs, and the unwillingness of UK unions to accept necessary workforce reductions – not the EU’s trade measures – that are driving the decline of UK steel producers.

From our perspective, for the American steel industry, which exports relatively little to the European market, the EU’s proposed measures are not a bad policy. And, in many respects, they are necessary to counteract the massive amounts of overcapacity that persist in plaguing the global steel sector. However, as the Trump administration continues to negotiate trade agreements, it should not weaken the Section 232 steel program, especially as many of the world’s largest steel producing countries struggle to right-size their own production and capacity.

Put simply, the tariffs proposed by the EU (or similar measures adopted by any other country) should not deter the United States from pursuing trade policies that are in the best interests of American steelmakers. And the fact that the EU is finally listening to pleas for trade relief from its domestic industry should not become an excuse for the EU to get a break from the United States, allowing them to flood our market with their excess capacity or undercutting domestic prices by avoiding tariffs altogether.

We understand that Canada has tabled an offer regarding Section 232 steel duties. Canada has massive excess and subsidized capacity that has materially harmed the US industry. The Canadian government has prevented closures of exported oriented capacity and bailed out two of its three largest producers with substantial subsidies over the last 15 years. US mills have been forced to shutter as a consequence.

Take Algoma Steel, for example. Like many other Canadian steel companies, Algoma is heavily subsidized by the Canadian government. Algoma has used those subsidies to maintain, modernize, and expand capacity that is destined for the United States.

While there is a lot of happy talk from Canada about a unified North American supply chain, nobody needed the additional plate capacity that the Canadian provincial and central governments funded through Algoma. With Section 232 duties in place, Algoma has no demand for this capacity in Canada. Still, the Canadian government is acting like it is the innocent party.

All the while, Canada is implementing more subsidies and eyeing a plan to shift its excess capacity towards beam production to be fabricated in Canada and then exported to the United States. This will take even more US jobs from American beam producers and fabricators. Canada is not learning the correct lesson.

If Algoma and other Canadian producers want lower tariffs and greater access to the United States, then they should first demonstrate that they have right-sized their own capacity in line with their domestic demand (not evasion through fabrication) and are no longer relying on government support to fuel their operations. Indeed, recent subsidies to Algoma and others should be paid back, rather than expanded. Absent taking those steps, any trade deal with Canada that further opens the US market to imports will only allow low-priced Canadian steel to surge in even greater volumes into the United States.

It is also notable that the EU’s newly proposed steel tariff plan primarily focuses on raw steel and steel products, while not covering downstream derivative products. Although the European Commission has indicated that it will evaluate the necessity to adjust the scope of the measures over time, the exclusion of steel derivatives further highlights that the EU’s new tariffs are little more than a half-measure and not a reason to weaken US trade protections.

Similarly, the EU fails to implement a domestic melted and poured requirement as part of the first phase of its proposed measures, and it continues to allow Russian semi-finished steel into the European market—sustaining Russian steel capacity that should have transitioned long ago.

In short, while the EU’s proposed steel tariff measures are notable and likely a sensible bulwark against global overcapacity, they do not solve their internal problem. That will take years and many shutdowns of excess EU capacity. In this regard, whether it is the newly announced EU tariffs or other proposals, the United States should be wary of negotiating away the benefits of the Section 232 steel program based on announcements and first steps to address overcapacity problems.

Editor’s note

This is an opinion column. The views in this article are those of experienced trade attorneys on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.