The European Union Trade Commissioner Maros Sefcovic announced on Monday (July 28) that the EU and the United States will establish a “metals alliance” under the framework of a bilateral trade agreement to counter the impact of global market disruptions caused by overcapacity due to Chinese subsidies.
Sefcovic stated that after several hours of discussions, American officials recognized that the steel and aluminum industries in the US and Europe are facing similar problems. As part of the agreement, the US will lift the 50% tariffs imposed on European steel and aluminum products by the Trump administration, replacing them with a zero-tariff quota system, with the specific quota details yet to be finalized.
On Sunday (July 27), the US and EU reached a crucial trade agreement where the US will impose 15% tariffs on EU products, including automobiles. In return, the EU agreed to purchase a significant amount of energy products and military equipment from the US and open its market to American goods. However, the 50% steel and aluminum tariffs remain unchanged.
According to Reuters, Sefcovic stated in a press conference on Monday, “This agreement clearly shows the prospect of joint action in the steel, aluminum, copper, and derivative industries, which I refer to as a ‘metals alliance’. Through historic levels of tariff quotas and preferential treatment, we are establishing a common protective shield for our economies.”
He added, “It is evident that we have no issues with each other on steel and metals matters.”
In recent years, China’s subsidies and state-led expansion plans have led to massive overproduction in industries such as steel, aluminum, solar panels, and electric vehicles, resulting in a sharp decline in global market prices, affecting local industries in the EU, the US, Japan, India, and other countries. European steel manufacturers have complained about Chinese products being dumped in international markets at prices below cost, leading to unemployment, factory closures, and increased trade protectionism.
For Europe, the urgent need to lift US steel tariffs is particularly pressing as the current supply of scrap metal from European steel mills is being heavily absorbed by US factories. Scrap metal costs less than primary metal and requires less energy to convert into finished products, making it an essential raw material for European steel mills.
The proposed alliance and quota system reflect a growing trend in the West to take countermeasures against China’s overcapacity. During the G7 finance ministers’ meeting in May this year, member countries agreed to collaborate in addressing global economic “excessive imbalances,” although not explicitly mentioning China, it is widely interpreted to be related to China.
Sefcovic also mentioned the EU-China summit held last week, admitting, “Despite our tremendous efforts and long talks with the Chinese side, the list of accumulated problems has not only failed to decrease but has grown longer.”
He pointed out, “Evidently, the root cause of the problem lies in overcapacity, which is directly related to what we believe are illegal subsidies.”