Testing Economic Alliances: The US and Europe fail to move past Trump-Era Tariffs
The US-EU Summit in Washington on Friday, with President Biden and EU Commission President Ursula von der Leyen. Photo: WSJ/Olivier Douliery
The United States and Europe have historically been close allies, sharing common values, strategic interests, and extensive economic ties. Over the last two years, the United States and the European Union have been working towards an agreement revolving around the sustainable trade of steel and aluminum as part of the fight against climate change. However, Biden’s reluctance to eliminate the existing trade tariffs on metals, imposed by the former Trump administration, has caused a rift between the two economic powerhouses.
Former President Donald Trump initially imposed trade tariffs on metals in 2018 due to national security concerns, citing the fact that the metal industry is critical to various sectors, such as national defense. The imposition sparked trade disputes with long-time allies like the European Union, who responded with retaliatory tariffs on American goods.
On Oct. 20, a US-EU Summit was held in Washington to discuss the future of transatlantic partnership, climate change, trade, and competition with China. However, their talks were filled with obstacles, and an unwillingness to cooperate from both sides. According to William Alan Reinsch, the Scholl Chair in International Business at the Center for Strategic and International Studies, “[Reinsch] can see a path, but the path involves both sides making concessions that they really don’t want to make.”
Upon assuming office, Biden allowed the tariff-free import of European steel and aluminum in an effort to improve the US-EU relationship. However, the EU is being threatened by the return of these tariffs, should both sides be unable to reach an agreement that addresses the oversupply of steel on global markets, discourages trade in products made with more carbon emissions, and combats the import of unsustainable steel from China. Hence, the suspension — rather than complete elimination — of tariffs on European metals has contributed to a rise in unresolvable tensions.
From the American perspective, Biden aims to distinguish his position from traditional trade negotiations by imposing tariffs to protect US industries, blocking the circulation of cheaper goods from China. As said by Emily Benson, the director of the Project on Trade and Technology at the Center for Strategic and International Studies,“[The US] administration is trying to significantly retool the way we go about global economic engagement.”
On the other hand, the EU perceives these American tariffs as a result of protectionism more than it is a solution to sustainability and minimizing competition with China. The EU is instead pushing to adopt a new carbon pricing scheme — also known as a “carbon border adjustment mechanism” — that is designed to make products more expensive if they’re sourced from manufacturers with high greenhouse gas emissions. The US has argued against this policy, stating that such a system would not work for American companies.
Workers hoist a collection of steel reinforcement bars in a storage area located in Shanghai. Photo: Bloomberg/Qilai Shen
Their talks were also followed by clashing conflicts on how to approach China as a global economic competitor. While the US remains adamant about targeting China with tariffs and economic pressures, European countries continue to view China as a more crucial economic ally rather than a geopolitical adversary. The European Union seeks to pursue a conclusive cessation of U.S. tariffs, and insists that any trade actions taken must adhere to the regulations established by the World Trade Organization.
The US-EU trade dispute should not be treated as an isolated case. There are worldwide implications to the dispute, with the United States and Europe as the two greatest economies in the world, with their actions and policies having a significant global impact. Despite being close geopolitical allies, US and EU policies have diverged in many areas, especially in the handling of economic sanctions. The lack of resolution between both nations may encourage other countries to carry out protectionist policies, which may cause a global heightening in trade tensions. But for now, the answer to whether the US and EU will become a united transatlantic front against China is still unclear.