EU Aims to Ease US Tariff and Green Subsidy Threats
EU’s Efforts to Counter Tariffs and Subsidies
The European Union is taking measures to prevent the reinstatement of Trump-era metal tariffs and to mitigate the negative impact on the US Inflation Reduction Act (IRA) and its electric vehicle subsidies. This week, US President Joe Biden will host a summit with European Commission chief Ursula von der Leyen and European Council head Charles Michel, focusing on transatlantic unity and economic issues, including a joint statement on addressing global steel and aluminium overcapacity and promoting sustainable production.
Challenges in the Negotiations
As part of the negotiations, the United States has asked the EU to take action against Chinese steel producers to avoid the re-imposition of tariffs on EU steel and aluminium. However, EU countries have emphasized the need to comply with WTO rules, which prohibit imposing tariffs on third countries like China before conducting an investigation into excessive subsidies or dumping.
Reconciling Carbon Border Tariffs and Green Subsidies
Another challenge in the negotiations is reconciling the EU’s carbon border tariff system with the US approach to promoting a greener economy through subsidies. EU countries have expressed concerns about the US subsidies, particularly those in the IRA, which have local content requirements. For instance, US consumers are eligible for tax breaks when purchasing electric vehicles, but only if the final assembly takes place in North America. Additionally, the tax break is dependent on critical minerals extraction and processing occurring in countries with which the US has free trade agreements.
EU’s Hopes for Critical Minerals Agreement
The EU hopes that the summit will also result in an agreement on critical minerals such as cobalt, graphite, lithium, manganese, and nickel. This agreement would benefit EU suppliers, as EU exports of these minerals and related products amounted to 3.5 billion euros in 2022, according to Eurostat data.
Overall, the EU is actively working to address the challenges posed by US tariffs and subsidies while seeking to promote sustainable production and secure agreements on critical minerals. The upcoming summit between the EU and the US will be crucial in determining the path forward for transatlantic economic cooperation.
