US ELECTIONS: EU, UK steel, aluminum industries eye potential tariffs

Former US President Donald Trump's election to a second term Nov. 6 has brought the issue of tariff-rate quotas into focus for Europe and the UK's steel and aluminum industries, with both sectors now likely to be keeping a close eye on potential trade flow changes.

In 2018, Trump introduced Section 232 tariffs of 25% and 10% respectively on certain imports of steel and aluminum to the US, although these were replaced with TRQs for the EU in 2021 and UK in 2022.

In December 2023, the US and EU extended the suspensions of their respective steel and aluminum tariffs beyond January 2024 after agreeing to continue work on reaching the Global Arrangement on Sustainable Steel and Aluminum, or GASSA.

The EU exported 2.23 million mt of finished steel products to the US in 2023, according to Eurofer, making it the EU’s second-largest destination after Turkey, while the UK exported 160,000 mt of steel to the US, according to UK Steel.

UK Steel's director for Trade and Economic Policy, Chrysa Glystra, told S&P Global Commodity Insights that the US already has multiple layers of tariffs on steel, adding that it would be surprising if the existing TRQ arrangements were cancelled. But she also said that GASSA looks less likely now.

Technically, she said, the EU’s TRQ arrangement is temporary and linked to a GASSA outcome, while the UK arrangement is not linked to GASSA.

“Rationally, I would say that it would not be in the US’ interest to remove all TRQ agreements and go back to tariffs against everyone as, last time round, that resulted in really high prices for consumers,” Glystra said.

“The current set-up seems to be a reasonable balancing of interests of the steel industry and its users. That said, if there is a wider wave of tariffs on everything, then steel might not be the exception. A repeal of IRA would also have an impact on some downstream consuming sectors,” she added.

Bumpier relationship

European Aluminium Director General Paul Voss told Commodity Insights that the challenges were easy to see and that it was fair to expect a "bumpier relationship" going forward.

“That said, we should be able to find common ground in some areas, including the need to get much tougher on unfair trade practices, particularly when it comes to China,” he said.

“As part of that process, we will need to explore pragmatic ways to protect and enhance Europe/US trade flow in the interest of consumers and businesses on both sides of the Atlantic,” Voss added.

One aluminum trader said he did not expect an immediate impact from the poll, adding that trade flows had already changed with Section 232 tariffs.

“If he ends the Russia/Ukraine war, it could pull forward the timeline when Russia is accepted in Europe, but it won’t happen overnight and any possible impact right now is speculative,” the trader added.

He said a Trump win was bullish for the Midwest premium, because it would be seen by the market as supportive of the economy and industrial activity.

“It will have knock-on effect on the EU in that the US premium will move higher and will eventually compete with the EU on these precious duty unpaid units. Second order effect would be bullish EU premium but it’s a long way to that,” the trader added.

The Platts spot 99.7% P1020 US Aluminum Transaction Premium was assessed at 21.6 cents/lb plus LME cash, delivered Midwest, net-30-day payment terms, Nov. 5, up from the previous 21.4 cents/lb. Platts is part of S&P Global Commodity Insights.

A Minor Metals Trading Association spokesperson said it would keep abreast of the developments resulting from the incoming Trump administration, such as changes to legislation and tariffs, to keep its members fully informed.

Auto industry response

Society of Motor Manufacturers & Traders CEO Mike Hawes told Commodity Insights the US was the UK automotive sector’s second-biggest trading partner after the EU, with reciprocal trade and investment boosting both economies.

“The UK should work with the new US administration to enhance this cooperation and seek mutual benefits, helping support sector jobs and growth across the Atlantic,” he said.

German auto industry association VDA's president, Hildegard Muller, said in a statement that the US was an essential partner for Germany and Europe and transatlantic cooperation remained of the utmost importance for both sides.

In 2023, Muller said German manufacturers produced more vehicles in the US than ever before, with half of the more than 900,000 vehicles produced in the US being exported.

She said around 400,000 cars were exported from Germany to the US in 2023 and in H1 2024 the US was the most important buyer of German car exports, with the US being the second-largest export market in the world after China for suppliers in the VDA.

“For the German automotive industry, trade and investment relations with the US are therefore of great importance -- any change in the framework conditions can affect the economic situation of the industry and thus also employment in Germany, but also in the US,” Muller said.

“It is crucial that Germany and Europe position themselves in such a way that we are fundamentally safe, more independent and more resilient. We must therefore first and foremost do our own tasks -- in all areas,” she said.

Meanwhile, German mechanical engineering association VDMA's managing director, Thilo Brodtmann, said Trump's second term would be “a greater challenge for German and European industry than his first.”

“We must take his tariff announcements seriously, in particular. This will once again put a noticeable strain on transatlantic trade and investment relations," he said in a statement, pointing out that the US was and would remain the most important export market outside the EU for mechanical and plant engineering from Germany.

“Our companies offer the products required to implement the re-industrialization of the US that Donald Trump is striving for. The VDMA's overall outlook for the American market therefore remains positive," he said.