US slides in trade war with EU over Trump-era tariffs

Photo: AP

The administration of US president Joe Biden faces a major challenge over a trade tariffs dispute with EU amid upcoming 1 June deadline, Reuters reported. The row was started by Biden’s predecessor Donald Trump in a move to protect jobs in US steel industry. In a retaliation move the EU threatened to raise tariffs on several US made products, including spirits, motorcycles and speed boats. Still the administration of Biden is reluctant to back in the tariffs row as it had in fact preserved thousands of jobs in US.

The trade war is extremely painful for Harley-Davidson and whiskey distillers. The EU has threatened to double the tariffs on Harley-Davidson motorcycles, American-made whiskey and power boats to 50% on 1 June, cutting off any residual hope of exports to the continent.President Joe Biden has pledged that he will maintain the tariff protections for the steel and aluminum industries until the problem of global excess production capacity - largely centered in China - can be addressed.His sentiments were echoed by US Trade Representative Katherine Tai and his Commerce secretary, Gina Raimondo, said earlier this month that the tariffs "helped save American jobs in steel and aluminum industries."

Harley-Davidson has also been hit by a European court ruling that its bikes produced in Thailand will be treated as US made, subjecting them to the 50% tariff as well - on top of the normal 6% tariff. "If not for the tariffs, which are now threatening our recovering export potential, we could be investing in jobs at our American facilities," Harley Chief Executive Jochen Zeitz told an earnings call. "Instead, we are facing huge tariffs in a trade war - in a trade war not of our making."

The United Steelworkers union and the mills that employ its members are urging the administration to continue backing the Section 232 tariffs on steel and aluminum, arguing that lifting them would allow subsidized Chinese steel to flood back into the US market via third countries.

US Trade Representative Tai told senators that she is working with EU counterparts to find a solution, but they must address the issue of excess capacity in China, which produces half the world's steel. She said she hopes that EU officials see the problem "as serious a challenge to their ability to produce and compete in steelmaking as we see it, and working together we will be able to resolve these sets of tariffs so that we can join forces on the bigger picture." The EU has never accepted the premise of the 25% steel and 10% aluminum tariffs imposed by former president Donald Trump in March 2018, duties based on a Cold War-era trade law to protect domestic industries deemed critical to national security.

When the tariffs were imposed, the steel industry looked very different from its current supply-constrained condition. Imports were flooding in, taking nearly 30% of the U.S. market, and holding US Midwest hot-rolled steel spot prices below $600 per ton.

With the administration of Biden now pushing a massive $2 trillion infrastructure plan, the demand for steel is expected to grow, and some doubt that demand can be met if the tariffs remain in place.

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