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EU-U.S. Summit: Trade Stalemate and Tariff Impasse

Discover the latest updates from the EU-U.S. Summit on trade, as the two powerhouses struggle to find common ground on tariffs and critical minerals.

Source: Twitter Account EU Commission


The European Union and the United States share the largest trade and investment relationship worldwide, based on common values and extending beyond economics.


"Today’s EU-US Summit gives the opportunity to boost our cooperation and sets out a roadmap for years to come in the areas of artificial intelligence, climate change, digital infrastructure and trade". - EU Commission

During the EU-U.S. Summit last week, trade negotiators from the United States and Europe engaged in discussions regarding the long-standing trade disputes over tariffs under the Trump administration and US green subsidies. Unfortunately, the talks were unable to resolve the issues, particularly those concerning steel tariffs and the impact of new American tax incentives for purchasing electric vehicles (EVs) produced in North America on Europe.


The European Union aimed to reach agreements with the US to curtail the effects of US green subsidies and eliminate the tariffs imposed by the previous US administration. However, the ongoing turmoil in the Middle East and apprehensions about the US losing support for Ukraine overshadowed their efforts.


Challenge 1: Tariffs on steel and aluminium


In 2018, then-President Donald Trump imposed import duties of 10% on aluminium and 25% on steel from the EU.


Recently, the US has lifted these tariffs, but with a catch: The exemption is granted only if both parties come to an agreement on tackling overcapacity in non-market economies such as China and promoting greener steel.


The US has put forward a demand that the EU impose metal tariffs on Chinese imports. However, the EU has stated that it can only do so after a year-long investigation to ensure compliance with WTO regulations.


The negotiations are currently aimed at achieving a mutually beneficial deal by the end of the year.



Challenge 2: Critical minerals agreement


The EU has announced that they have made progress with the U.S. towards reaching a targeted critical minerals agreement.


The EU is particularly concerned about the impact of new American tax incentives for purchasing electric vehicles produced in North America rather than Europe. The U.S. Inflation Reduction Act gives consumers tax advantages to buy electric vehicles built only in North America.


The EU wants to ensure that minerals necessary for the production of electric vehicles, extracted or processed in the European Union, count towards the requirements for clean vehicles as per Section 30D clean vehicle tax credit of the Inflation Reduction Act. This would mean that electric vehicles containing essential components sourced from the EU would be eligible for at least partial tax savings.


The minerals in question include cobalt, graphite, lithium, manganese, and nickel. However, it is worth noting that the EU requires these minerals for its own green transformation, so the benefits to the bloc might be limited.


The United States has proposed the creation of a green steel club that would be open to other allies and largely tariff-free. However, state-owned firms would be restricted from joining, which would prevent China from becoming a member.


Although there has been progress towards a compromise to mitigate the effects of the U.S. Inflation Reduction Act, it seems that a resolution is still distant.


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