US, EU Join Forces To Tackle China's Steel Surplus, Reshaping Trump-Era Tariffs

The U.S. and the EU are on the verge of a groundbreaking partnership aimed at countering China’s burgeoning steel surplus.

This audacious move not only seeks to curb excess steel production, but also aims to bury the hatchet on a long-standing trade dispute that traces its roots back to the Trump administration.

Taking on China’s Steel Overproduction

At the heart of this agreement lies the intent to introduce fresh tariffs, primarily targeting imports from China that have thrived due to non-market practices, as Bloomberg reported Thursday.

Negotiations are still underway. Crucial details such as the scope of these tariffs and potential targets in other countries were not immediately unclear.

Furthermore, this accord is designed to set a framework that invites other nations to join in the future, potentially reshaping the landscape of global steel trade.

This new pact is an integral part of the broader Global Arrangement on Sustainable Steel and Aluminum, a negotiation that commenced in 2021 between the EU and the Biden administration. This negotiation aims to settle a dispute that first flared up when former President Donald Trump imposed tariffs on metal imports from Europe, citing national security concerns.

Steelmakers Rallied in 2023

The most widely recognized exchange-traded fund (ETF) focusing on stocks from various sectors, including materials, metals, and mining, particularly steel, is the VanEck Steel ETF SLX.

Over the past year, this fund has displayed impressive performance, delivering a remarkable 35% return, with a significant 16% increase year-to-date. The standout contributor to this outstanding performance has been POSCO Holdings Inc. PKX, which has surged by more than 100% year-to-date.

Within the realm of U.S. steel producers, notable performances have been observed. U.S. Steel Corp. X has seen a robust increase of 22% year-to-date, while Nucor Corp. NUE has posted a substantial gain of 28% in the same period. Reliance Steel & Aluminum Co. RS has outperformed with an impressive 32% year-to-date growth.

Current Tariffs and Potential Implications

Since 2018, the U.S. has imposed a 25% tariff on steel imports, with the EU implementing a similar duty on a range of steel imports under its safeguard measures.

In 2021, both sides temporarily suspended punitive measures on each other’s goods, setting a deadline for finding a permanent solution by Oct. 31, 2023.

Failure to reach an agreement would automatically resurrect Trump-era tariffs and EU retaliatory measures, impacting over $10 billion in exports.

What Lies Ahead

Talks regarding the Global Sustainable Agreement aim to prepare for a US-EU summit slated for late October, offering hope for a mutually beneficial understanding.

This could have significant implications for Chinese steelmakers, who have been increasing their exports due to weak domestic demand and a depreciating yuan, making their exports more attractive.

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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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