“The conversation is a lot less, when it comes to steel, about bilateral relations and tariffs, and it’s a lot more about strategy with China,” said Chad Bown, senior researcher at the Peterson Institute for International Economics.
The tariffs are popular with steel and aluminum companies and, perhaps more importantly, unions representing their workers. Many of them live in vital swing states like Pennsylvania. Biden’s own administration trumpeted that tariffs were “effective” in uplifting the national steel industry and its workforce.
“These are important constituencies for the Biden administration, so just pulling the rug out from under them without something important in its place that was enforceable would be really, really difficult,” said Dennis Shea, a member of the Bipartisan. Policy Center who was Trump’s deputy. trade representative and ambassador to the World Trade Organization.
A Commerce Department spokesman told POLITICO that US officials were “engaged in constructive discussions” with their European counterparts on ways to resolve the steel problem. Asked about Biden’s upcoming meetings in Europe, the spokesperson simply said: “We welcome the opportunities to continue this dialogue at all levels of government to help ensure the viability of our critical industries.”
Still, Biden is making some inroads to win help from Europe. Ahead of this week’s G-7 Rich Economies meeting, countries’ trade ministers pledged to tackle the issues that have led to a glut of steel and said it was “paramount” that other countries are participating in the effort.
“We believe that dialogue, transparency and cooperation at the global level represent a crucial means of remedying the imbalances created by the worsening overcapacity”, a joint statement read.
This cooperative tone is a change from the Trump years.
U.S. Trade Representative Katherine Tai, Commerce Secretary Gina Raimondo and European Commission Trade Chief Valdis Dombrovskis have agreed to negotiate a plan by the end of the year to tackle excess capacity in the industry. ‘steel and aluminum in China without harming their own industries.
In the meantime, the Biden administration is keeping tariffs of 25% on steel and 10% on aluminum in place against European imports, even as some trading partners like Canada and Mexico have seen theirs. lifted.
Outside forces are also pressuring officials to quickly come to an agreement to remove tariffs. In the United States, powerful industry groups such as the Chamber of Commerce and the National Council for Foreign Trade pressured Biden to remove tariffs on steel and aluminum, which they say have resulted in higher prices for products using steel and longer waiting times for deliveries.
Three years ago, the European Union also hit back against Trump’s steel tariffs by imposing tariffs on prized US exports like orange juice, bourbon, Harleys and a host of industrial goods. Europe threatened to double these rights on June 1 but agreed to wait while negotiations continue.
Europe is also facing its own internal pressures. The UK and the EU are soon to decide to continue restricting steel imports from other countries, a move put in place in 2018 after Trump’s tariffs. Their steel and aluminum industries are pushing for these measures to be maintained as long as U.S. tariffs are in place, even if doing so risks disrupting other trading partners.
At the root of all these tensions is what needs to be done about China’s excess steel production, which has irritated administrations at least since President George W. Bush.
China produced five times more steel in 2019 than in 2000, according to OECD data, and it now produces more than 50 percent of the world’s supply. Even when the United States and other countries impose tariffs on imports, Chinese steel is often shipped to other countries who process it and sell it in the world market as their own, thereby bypassing restrictions. .
Thomas Conway, international president of the United Steelworkers, told a recent event in Washington that negotiations between the United States and the EU must resolve the issue of China selling its steel to other countries to evade tariffs , what he called the “Whac-A-Mole”. problem.
In 2016, the Obama administration and other G-20 countries established the Global Forum on Surplus Steel Capacity, an international body for countries to share information about their production and work together to reduce excess supply. But the Trump administration has criticized the body for failing to hold major offenders like China to account.
In March 2018, Trump enacted a 25% tariff on steel and a 10% tariff on aluminum on imports from almost all countries, building on what had been a little used provision of the Section 232 of the Trade Expansion Act of 1962. tariffs if cheap foreign imports erode U.S. national security, which Trump claimed steel and aluminum imports did.
Trump’s decision divided senior officials in his administration and Congressional Republicans, but appeased a contingent of union workers and manufacturers who helped him win the White House. Indeed, Trump first announced the tariffs during a White House meeting surrounded by steel and aluminum executives.
“There is a lot, I think, of incorrect cynicism around 232 that it kind of falsely supported the steel industry, but it doesn’t,” said Leon Topalian, CEO of Nucor, most major steel producer in North Carolina. the United States “It was about getting countries to the negotiating table and negotiating better deals.”
But critics inside and outside the White House have argued that it is a blunt instrument that will do more harm to the country’s allies than its adversaries. The main sources of foreign steel at the time were Canada, South Korea, Mexico, Japan and Germany, with China producing a much smaller share of US imports.
The Trump administration subsequently exempted Brazil, South Korea and Argentina from tariffs on steel after those countries agreed to limit their exports to the United States. Australia also obtained an exemption. Mexico and Canada have secured tariff stays in talks to establish the US-Mexico-Canada deal.
Biden must now strike a deal with Europe. But what can be done with Chinese production that has not already been tried remains the key question.
At the moment, there is little that the Global Steel Excess Capacity Forum can do to help Biden. China and India have abandoned the group, leaving it without the world’s major steel-producing countries.
The American Chamber of Commerce, which wants Biden to lift tariffs, suggested last month that the administration give renewed importance to the forum and work with its allies to monitor and prevent import surges, much like the arrangement the United States has reached with Canada and Mexico.
“I don’t think 232 is going to stay put forever, but I think it’s an important tool right now,” said Topalian, who was recently appointed president of the American Iron and Steel Institute, an association professional. “We need to continue to work with the administration on how… we make sure the playing field is level.”