EU, US temporarily suspend tariffs in steel dispute

The European Union on Monday decided to temporarily suspend some measures at the heart of a steel tariff dispute with the United States that is seen as one of the major trade issues dividing the two sides.

With the decision, “we are walking the talk in our efforts to reboot the trans-Atlantic relationship,” EU trade chief Valdis Dombrovskis said when announcing the 27-nation bloc would not automatically increase some tariffs targeting US products. The trans-Atlantic fight has affected anything from steel production to Kentucky bourbon sales.

The temporary suspension was underscoring a commitment that both sides want to have talks “to address global steel and aluminum excess capacity.

“We are creating the space to resolve these issues before the end of the year,” Dombrovskis said.

In a joint statement, both sides said that “to ensure the most constructive environment for these joint efforts, they agreed to avoid changes on these issues that negatively affect bilateral trade.”

It was the second palpable step to get back to better trade relations under President Joe Biden after both sides in March decided on a four-month suspension of tariffs used in the longstanding Airbus-Boeing dispute.

“As early as December 2020, the EU reached out to the Biden administration with a plan for a renewed EU-US agenda, and we are pleased to see this approach bearing fruit,” Dombrovskis said.

The decision comes in time for the visit of Biden to EU headquarters in mid-June to discuss a new relationship after the bloc’s difficult relationship with his predecessor, Donald Trump.

The issue goes back to the 2018 tariffs that Trump slapped on EU steel and aluminum, which enraged European and other allies by calling their metals a threat to US national security. The Article 232 proceeding both hurts European producers and has raised the cost of steel for American companies.

“The EU is not a national security threat to the US But the distortions created by global excess capacity — driven largely by third parties — pose a serious threat to the market-oriented EU and US,” Dombrovskis said.

Together, the EU and US would be better positioned to deal with major steel producer China, which is seen as partly responsible for the glut.

When Trump imposed the tariffs, Europe retaliated by raising tariffs on U.S.-made motorcycles, bourbon, peanut butter and jeans, among other items.

The US spirits industry was elated.

“This news couldn’t come soon enough. Distillers across the United States are breathing a huge sigh of relief after bracing for a 50% tariff on American whiskeys in just a matter of days,” said Chris Swonger, president of the Distilled Spirits Council. He said more tariffs “would have forced many craft distillers out of the EU market,” one of the most lucrative markets in the world.

Even big companies would have been affected, like the producer of Jack Daniel’s Tennessee Whiskey. “We are encouraged by today’s agreement between the US and the EU to avoid the doubling of tariffs on American whiskey,” the Louisville, Kentucky-based Brown-Forman Corp. said in a statement.

Even if US whiskey remains subject to 25% retaliatory tariffs, “we remain hopeful that the negotiators will build on the progress that’s been made and ultimately secure a removal of tariffs,” it said.