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Trump-era tensions set to cool under U.S.-EU deal

The Biden administration will ease tariffs on steel and aluminum imports from the European Union under an agreement reached Saturday, resolving a Trump-era tension that for years has tarnished trade relations between the longtime allies.

The EU will be permitted to send a set amount of steel and aluminum each year into the United States duty free under the new arrangement. The White House hasn’t specified how much will be allowed or what the duties will be on imports that exceed the limits, but the current tariffs are 25 percent for steel and 10 percent for aluminum.

The new arrangement required months of intense negotiations among top trade officials and has been viewed on both sides of the Atlantic as a compromise that the trading partners made for the sake of a fresh start following four years of discord under former President Donald Trump.

“Today’s announcement delivers on President Biden’s vision to turn the page on past disputes and begin a new chapter of enhanced trans-Atlantic relations,” U.S. Trade Representative Katherine Tai told reporters on Saturday.

EU Trade Commissioner Valdis Dombrovskis suggested in a tweet Saturday that the deal will not be permanent, describing the latest developments as a “pause” in the dispute. Biden and European Commission President Ursula von der Leyen will announce more details on Sunday, he noted.

The trading partners also agreed to develop a long-term plan that both confronts China over its excess steel production and applies pressure on exporters of carbon-intensive steel. U.S. officials described it as a first-of-its kind deal. U.S. officials described the deal as a first-of-its kind but did not outline specific commitments, saying those would be negotiated later with input from other major steel-producing economies.

“Not only does today’s deal remove one of the largest bilateral irritants in the U.S.-EU relationship, it actually transforms it into a joint forward progress on two central challenges,” National Security Adviser Jake Sullivan told reporters on the briefing call.

But while both sides share those priorities, they have not always agreed on an approach.

The Biden administration has prodded Brussels to take a tougher posture toward Beijing on trade and other issues, but some European leaders say they’re more inclined to engage with rather than oppose China. And while the EU is pursuing a carbon border tax on steel and other products, such proposals are more difficult to implement in the U.S. for political and practical reasons.

Trump stoked the ire of trading partners around the world when he announced tariffs on steel and aluminum imports in 2018, arguing that inexpensive foreign imports were unfairly undermining U.S. producers and thus posing a threat to national security. His administration brokered alternative trade measures with Canada, Mexico and other allies, but kept the EU duties in place.

An industry official told POLITICO the new arrangement will include a quota that allows 3.3 million metric tons of steel to be imported from the EU without tariffs and that imports above that amount will be subject to the existing 25 percent levy.

An additional 1 million metric tons of steel that had previously been exempt from the existing tariffs will not be subject to duties for at least another two years under the new arrangement.

The deal also contains a “melted and poured” standard that, as the name suggests, requires tariff-free metals be melted and poured in Europe, another senior administration official said. U.S. steel producers lobbied for those rules to be included in order to prevent steel from China and other countries from being passed off as an EU product.

“For far too long, China was routing its cheap steel into the U.S. via Europe and other markets, which drove down prices and made it essentially impossible for America’s steel and aluminum industry to compete. And, of course, in so doing, hurting the industry, hurting our workers,” Commerce Secretary Gina Raimondo said.

Raimondo acknowledged to reporters that the negotiations have been “arduous” and “complicated.” The Biden administration has faced intense pressure from the steel industry and its influential labor unions to keep the tariffs in place or replace them with similar protections. Those groups praised the deal reached Saturday.

“Proper implementation and enforcement of the [limits] will be crucial to ensuring that the new measures are effective in meeting these critical objectives,” Kevin Dempsey, the president and CEO of the American Iron and Steel Institute, said in a statement. “We hope that with the conclusion of this agreement, the United States and the EU will now work on a common action plan for challenging non-market industrial policies and other government interventions that fuel overcapacity in steel.

Tom Conway, the president of United Steelworkers International, praised the deal for continue to support U.S. producers by capping duty-free imports and combating cheap foreign steel from being routed through Europe. “The deal creates certainty both for domestic producers of steel and users who are unable to find domestic supplies,” Conway said in a statement.

At the same time, U.S. companies that need metals for manufacturing have complained that the cost of steel has skyrocketed and their orders are delayed. Raimondo said Saturday that an increase in tariff-free imports from the EU will help relieve both of those issues.

Various U.S. exports such as orange juice, whiskey and Harley-Davidson motorcycles have also been hit with 25 percent retaliatory tariffs from the EU, which had been slated to double in June before both sides started negotiations. The penalties turned a wide range of U.S. industries, including food and manufactured goods, into collateral damage and ratcheted up the pressure on Biden to cut a deal.

Tai said the EU has agreed to eliminate those retaliatory tariffs as part of the deal, adding that both sides will also withdraw their trade complaints at the World Trade Organization.

Senate Finance Chair Ron Wyden (D-Ore.) said the deal “takes significant steps” to resolve the tariff dispute and “begin a new phase of substantial cooperation” on shared issues like climate. “Continuing to strengthen the U.S.-EU relationship is essential to combat China’s efforts to take over entire industries and leave American workers in the lurch,” he said in a statement.

But some trade groups contend the new terms do not go far enough. Jake Colvin, the president of the National Foreign Trade Council, said the deal is “not an optimal outcome” because it installs “an unwelcome form of managed trade that will continue to bring about uncertainty for workers and businesses on both sides of the Atlantic.”

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