The latest proposal for a trade agreement between the EU and the US does not include a removal or reduction of the punitive 50% tariff Donald Trump imposed on steel imports, it has emerged.
It is a big setback for the industry in the EU which last month warned it faced being wiped out by the 50% rate, high energy costs and cheap Chinese competition.
One Brussels diplomat confirmed the new outline deal to avert a trade war with the US – briefed out to member states on Wednesday – “includes a 15% baseline tariff on a range of goods, with notable exceptions such as steel, which remains at 50%”.
Other sources say the EU is pushing for a compromise, allowing a 50% tariff but only on steel exported above a certain quota.
Diplomats stressed that the exemptions and tariff reductions in both directions had still to be fully agreed. But if the steel tariff in the outline proposal remains, it means the EU will pay a far higher rate than the UK.
British steel is subject to a 25% tariff and there has been no indication this will rise further. Instead, the rate is due to be reduced to zero under the deal Keir Starmer struck in May. But, while much of the agreement came into force at the end of last month, the steel exemption remains tangled up in talks over the origin of some materials.
The EU’s 15% baseline rate for exports of all products to the US is also worse than the 10% agreed by Britain.
China’s president, Xi Jinping, told a summit in Beijing on Thursday that Chinese and European leaders must “make correct strategic choices” in the trade war.
“The challenges facing Europe at present do not come from China,” Xi said. “There are no fundamental conflicts of interest or geopolitical contradictions between China and the EU.”
The European Commission president, Ursula von der Leyen, told the same event that the EU would find it “very difficult to maintain its current level of openness” with China if Beijing maintained a massive trade surplus, which she blamed on “trade distortions” including state subsidies.
She said the EU accounted for 14.5% of China’s exports including steel, yet took only 8% of EU exports. “These numbers speak to the scale of our relationship, but they also expose a growing imbalance. It is mostly due to an increasing number of trade distortions and market access barriers,” she said.
While there was no formal agreement, progress seemed to have been made by the EU and China to unblock the supply of rare earths which has been holding up the car production industry.
The German car industry group, the VDA, said in a statement that “production stoppages can no longer be ruled out” because of the shortage of the minerals including the magnets needed for the electronic opening and closing of car windows, boots and bonnets.
“The Chinese export restrictions on rare earths are a serious challenge for the security of supply,” said Hildegard Müller, the VDA’s president.
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Von der Leyen told reporters the summit had arrived at a “practical solution” whereby car companies and others could “immediately ask us to mediate and find out why there’s a delay on the delivery”.
Under pressure from the US and China, European leaders sense that a quick deal with Washington – even if it involves a painful level of tariffs – is a price worth paying to stablise businesses.
The EU steel body, Eurofer, said this month that a 50% tariff would be catastrophic. Sources say Germany’s chancellor, Friedrich Merz, remains keen to seal a deal as soon as possible to provide stability to investors and manufacturers, particularly in the auto sector.
“As we lose our major export market the European market is being flooded by the steel the US is no long absorbing,” Eurofer said after the first attempt at a deal with the US was blown up by Trump 10 days ago.
It is possible that Merz, who has a direct line to the US president, may reach out to him, potentially during his scheduled trip to Scotland this weekend to visit his two golf courses.
The European Central Bank kept interest rates unchanged on Thursday as policymakers waited to see whether the eurozone would be hit by US tariffs.