U.S.-EU trade deal hits EU metals with higher tariffs

On the heels of the U.S.-U.K. deal, the U.S. government signed a trade deal with the EU to ease tensions. Their terms, however, differ starkly, with the EU metal industry getting the shorter end of the stick. The baseline duties for the U.K. stand at ten percent versus 15 percent for the EU.

Trade deals as they are 

he U.S.-U.K. trade agreement has offered more immediate tariff reductions, albeit on limited volumes of goods. In contrast, the U.S.-EU agreement leaves in place substantial tariffs, with ongoing discussions of future reforms.

Although both deals are influenced by the shared goal of addressing Chinese overcapacity, EU metals exporters currently face a significant competitive disadvantage compared to their U.K. counterparts.

In the deal signed with the U.K. in May, the U.S. government reduced car export tariffs from 27.5 percent to 10 percent. Meanwhile, 10 percent tariffs on engines and aircraft parts were removed, benefitting the aerospace sector. The removal also aided companies like Rolls-Royce to become more competitive, according to a statement released by the U.K. government.

The need to keep tariffs 

For steel and aluminum and their products, the U.S. had plans to set tariff-rate quotas for items originating from the U.K. These quotas were proposed to be in line with the terms outlined in the Economic Prosperity Deal. Products exceeding these quotas or failing to meet specified requirements will remain subject to the current Section 232 tariffs. The deadline for the deal was set at July 9. However, the two countries were unable to finalize the deal, keeping the existing 25 percent tariffs in place.

Gareth Stace, director general of UK Steel, noted that keeping the tariff at 25 percent benefits shipments already underway, which might have otherwise faced increased charges. However, Stace emphasized ongoing uncertainty about the timing and final tariff decisions, warning that U.S. buyers may hesitate to place new orders from U.K. suppliers. He stressed the urgency for the U.S. and U.K. to finalize the May agreement to remove tariffs fully, especially given the challenging conditions facing the U.K. steel industry.

Why the U.S. is vital for European metal trade 

In 2024, the U.S. represented a crucial export destination for U.K. aluminum, making up 10 percent of the U.K.'s total aluminum exports and valued at £225 million. Members of the Aluminum Federation (ALFED) have observed early indicators of market disruption, such as a clear reduction in order volumes from the U.S., worries about losing contracts, and fears that semi-finished aluminum products that were meant to be shipped to the U.S. might instead be redirected to the U.K. market. These developments signal significant challenges ahead for U.K. aluminum producers amid changing trade dynamics.

Meanwhile, the U.S. government has kept the tariffs on steel and aluminum imports from the EU unchanged at 50 percent. Other changes, however, include the exemption of airplanes and aircraft parts from any tariffs.

Beyond steel-specific measures, the general 15 percent tariff on EU exports, previously just 2.5 percent, is likely to impact steel demand indirectly. The association added that steel-intensive industries, including automotive and machinery manufacturing, stand to lose heavily. In 2024, the EU exported around 760,000 vehicles to the U.S., representing roughly one million metric tonnes of steel content, much of which now faces a tougher tariff barrier, according to the European Steel Association (EUROFER).

Axel Eggert, director general of EUROFER, indicated that while the effects on the EU steel sector are expected to remain significant, there is optimism regarding potential collaborative efforts between the EU and the U.S. to address the harmful spillover consequences caused by the global steel overcapacity affecting both markets.

European Aluminum believes that the deal indicates a possibility of a reduction in tariffs and the introduction of a quota system for steel and aluminum imports. However, specific details on the implementation timeline, the exact tariff reductions, and how the quota system will operate have not yet been clearly outlined.

By the numbers 

In 2024, the U.K. exported 180,000 metric tonnes of semi-finished and finished steel to the U.S., worth £370 million, accounting for seven percent of the U.K.'s total steel exports by volume and nine percent by value, according to UK Steel.

The country exported 300,000 metric tonnes, or £490 million worth of steel to the U.S. in 2017 before Section 232 tariffs were imposed in 2018. The U.K. exported an average of 200,000 metric tonnes (£320 million) over 2018-2021. The system of tariff rate quotas agreed by the U.S. and the U.K. in 2022 boosted exports slightly to 235,000 metric tonnes (£517 million).

By then, the EU steel industry had already lost around one million metric tonnes of steel exports to the U.S. since the application of Section 232 in 2018, down from 4.6 million metric tonnes to 3.8 million metric tonnes in 2024, of which around 600,000 metric tonnes were subject to 25 percent tariff. A 50 percent out-of-quota tariff would likely also eliminate those exports, believes EUROFER.

The effects of the latest additional U.S. tariffs on EU steel are already having a further destructive impact on the sector. The European Commission promised in its "Steel and Metals Action Plan" a "highly effective steel trade measure" to be presented by September 2025. 

Mayuri Phadnis is the European Markets editor and ferrous analyst at Davis Index. You can email them at [email protected].