The European Union Trade Commission warned of the repercussions of the continuation of the US-European steel dispute and called for the need to find a compromise to end the confrontation between the two parties.

In 2018, former US President Donald Trump imposed tariffs of 25 per cent on steel and 10 per cent on aluminium for national security reasons, which angered European Union capitals.

Last June, the union rejected the proposed American solution to end tariffs on steel and aluminium, as the British newspaper “Financial Times” quoted informed sources stating that it believed that the American solution was likely to violate the rules of the World Trade Organization because it discriminates against local producers.

The United States and the European Union announced in October 2021 that they had agreed to cancel US duties on European steel and aluminium imports, which means the duties that the Union intended to impose on several American products will not enter into force.

These fees, approved by the administration of the former US president, damaged commercial relations between the two parties. However, the Union and the United States of America must reach a binding agreement on the “Green Steel” club by next October to protect the climate.

Valdis Dombrovskis, Commissioner for Trade in the European Union, said in statements to the “Financial Times” newspaper: that the two sides hope to end the threat of imposing new tariffs on steel imports from the European Union before an upcoming meeting with Catherine Tay, the US trade representative.

Without an agreement, the tariffs, which have been temporarily lifted, will return in December, along with punitive measures from the European Union, the newspaper said. However, the commissioner insisted that the EU would not sign any deal that violated global trade standards.

“As the European Union, we are committed to multilateralism and the rules-based global order and would like to avoid entering into agreements that violate WTO rules,” Dombrovskis said.

The two sides paused the dispute two years ago and pledged to form a sustainable steel club that would prioritize low-carbon metals, address global oversupply, and Chinese support. However, the two sides struggled to agree on this global arrangement on sustainable steel and aluminium (GSA) before the October deadline.

According to media reports, the United States has proposed allowing club members to set emissions standards and impose tariffs on those who do not meet them.

Analysts say such a proposal, which favours domestic producers, would violate WTO rules, while others argue that elements of Washington’s proposed solution could unfairly discriminate against imports from some countries.

For its part, Brussels intends to amend a border carbon tax (CBAM), which would impose a tariff on imports according to the amount of carbon they emit. It wants this to form the basis of the club, but the United States does not have a national carbon pricing system and is unlikely to adopt it soon.

“We respect the EU’s concerns, but we continue to await a proposal from them that meets our high level of ambition and addresses our shared concerns about climate change and oversupply,” said Sam Michel, a spokesperson for the Office of the US Trade Representative.

The EU trade commissioner declined to speculate on whether he and Tay could extend the temporary moratorium on tariffs if there is no deal by next October.

Dombrovskis said he would discuss the US Inflation Reduction Act, which ties many US subsidies to domestic production and includes tax breaks for US consumers who buy electric cars with domestically manufactured batteries and in some countries have free trade agreements with the US.

The European Union believes that the support provided to companies that use components manufactured in America would add pressure on companies operating in Europe. It indicates the possibility that the law violates the rules of the World Trade Organization.

He expected to strike a deal before the expected summit between the European Union and the United States later this year. “Given the fact that we already had extensive discussions on this axis of the agreement before, we should be able to make rapid progress,” Dombrovskis said.

In a related context, he stressed the importance of transatlantic trade, describing it as “the artery of the global economy,” warning of the risk of fragmentation in global trade as some countries raise barriers to the flow of products and services.