The EU and the US will form a metals alliance to counter China’s excess capacity

The European Union and the US will form an alliance in the steel sector as part of a trade agreement to mitigate the impact of subsidized Chinese production on global markets. This was announced by European Commissioner for Trade Maros Šefčovič, according to Reuters.

“The agreement is clear prospect of joint action on steel, aluminium, copper and the derivatives in what I’d like to call a metals alliance, effectively creating a joint ring-fence around our respective economies through tariff rate quotas at historic levels with preferential treatment,” Šefčovič said.

According to him, during the negotiations, the parties agreed that their steel sectors face similar problems. European steel producers will be provided with a quota system with minimal or zero tariffs, which will replace 50% of US import duties – it has not yet been finalized.

The possible agreements, the agency notes, demonstrate a growing momentum to counter Chinese overproduction. In particular, global imbalances were discussed at the May G7 financial meeting.

Shevchovich also noted that despite the efforts of the European side and meetings with Chinese colleagues, the list of accumulated issues is only growing. He was referring to the recent EU-China summit.

“Clearly the issue is overcapacity. The issue is linked with what we perceive as illegal subsidies,” explained the European Commissioner for Trade.

The EU and the US have reached a new trade agreement. It provides for a fixed customs rate of 15% for most goods exported from the European Union. The agreement covers key industries – automotive, pharmaceuticals, microchip manufacturing – and is a “ceiling” without additional fees.

The parties also agreed on a “zero” duty for a number of strategic goods. The EU will also increase purchases of American energy carriers. As noted by the EC, there are also agreements in the steel sector. In order to combat global overproduction of steel and aluminum, it is planned to reduce tariffs and introduce quotas.