As EU officials tried to justify the new US tariff deal to a sceptical Brussels, they pointed to the “immediate relief” from even harsher measures. But for steel and aluminium, even that’s not guaranteed.
The preliminary agreement struck between the EU and US over the weekend imposed a 15% baseline tariff on most European exports but left the metals, which have been subject to a sweeping 50% levy since June, in limbo. EU leaders promised a quota system that would challenge China’s dominance of global markets, but no details have been forthcoming.
“The EU and the US face the common external challenge of global overcapacity” in metals markets, European Commission President Ursula von der Leyen said on Sunday as she outlined the hard-won deal. “We will work together to ensure fair global competition and, to reduce barriers between us, tariffs will be cut and a quota system will be put in place.”
Lingering trade uncertainty comes at a perilous time for the bloc’s steel sector, already under strain from a mix of high energy prices, difficulties in sourcing raw materials, and excess Chinese steel being dumped onto Europe and other global markets as domestic demand slows.
The idea is for the EU and the US to club together to push back excess Chinese supply. According to Von der Leyen, the new system would “basically go back … to historical quotas and create a ring-fencing to deal with the overcapacity globally that we see.”
In the immediate term, though, there’s no relief for an industry that has been sounding the alarm for years — even before being hit with steep tariffs. “The impact on European steel remains dramatic as long as 50% tariffs are still applied,” the European Steel Association said in a press release on Monday.
“The situation shows that the risk of massive global trade diversion remains,” echoed Kerstin Maria Rippel, director general of the German Steel Association, in a LinkedIn post. The result, she said, is that “additional steel volumes continue to push into the already massively pressured, unprotected EU market.”
Steel faces a perfect storm
Under the current circumstances, European steel producers stand to be hit by US tariffs both directly and through their downstream products, argued Stanislav Zinchenko, who runs an independent consultancy advising iron and steel firms.
“It’s a double attack on an already weak European steel industry at a moment when the sector is suffering because of high energy prices [and] weak local demand,” he said, pointing out that US tariffs of 15% will continue to apply to cars from 1 August, down from the 25% levy in place since April.
Roughly 760,000 European vehicles made their way to the US in 2024 under a previous 2.5% tariff regime, with European steel lobby Eurofer estimating those cars contained around 1 million tons of steel. With tariffs as high as 15%, European car exports to the US could fall dramatically, the lobby said.
In the longer term, EU officials expressed hope that the bloc could get favourable conditions thanks to its exports of “specialty steel that the US desperately needs,” as one senior Commission official put it at a briefing on Monday.
But Zinchenko said the assumption the EU wouldn’t be priced out of the market is magical thinking. “There’s nothing irreplaceable in a sector with more than 500 million tons of global excess capacity,” he said, pointing to the sharp post-Covid production rebound as a cautionary tale.
“In a half a year or a year, you’ll see new, cheaper suppliers,” he said. “You’ve seen after Covid and after the start of the Russian war in Ukraine how quickly the global supply chain can be fully reconfigured.”
What will happen next? Look at China
It is no coincidence that the EU was able to ink a trade deal with Washington just days after a long-planned summit with China went sideways, with Von der Leyen saying that relations with Beijing had reached an “inflection point” and demanding a “rebalancing” of what she described as unfair business relations.
Speaking at a press conference on Monday, Maroš Šefčovič, the EU's commissioner for trade and economic security, gave a similar assessment. “Of course, at the beginning of the year, we hoped for a better result,” he said of China’s reluctance to address Europe’s concerns with regards to excess supply crushing European steelmakers. “It’s a pressing, pressing issue.”
Zinchenko argued that, to predict the future of European steel, one should look at what kind of agreement will be struck between the US and China as both sides navigate a fragile trade truce that is set to come to an end by mid-August.
Currently, Chinese exports to the US are charged with a 30% levy — down from what at some point was a giant 145% — while US products are hit by a 10% tariff. “It's not only about the EU and the US — it’s a big game,” he said.
This article has been updated to clarify that the global steel market has 500m tons of excess capacity, not total capacity.
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