The European Union’s recent announcement to drastically reduce tariff-free quotas on imported steel has prompted significant alarm within the United Kingdom’s steel sector. The EU’s proposal includes a 47% reduction of these quotas compared to today’s level for 2024. They plan to double tariffs on excess steel imports from 25% to 50%. On Tuesday, the European Commission made its final ruling. This decision is consistent with recent tariffs and import restrictions on steel by the United States and Canada.
Gareth Stace, director general of UK Steel, characterized the situation as “perhaps the biggest crisis the U.K. steel industry has ever faced.” He pointed out the historic scale of the quota cuts. This, in addition to the doubling of tariffs on imports, will severely restrict our capacity to relieve overwhelming market pressures through importing.
In light of these developments, there is growing pressure on the U.K. government to negotiate an exemption from the new EU steel tariff quotas or duties. British Industry Minister Chris McDonald stressed the importance of the government using the U.K.’s deep trading relations with the EU to their advantage. He cautioned that if the government can’t ensure those conditions for U.K. steel producers, the result would be “catastrophic.”
“Government must go all out to leverage our trading relationship with the European Union to secure U.K. country quotas or potentially face disaster.” – Chris McDonald, British Industry Minister
The EU’s recent decision has sparked fear throughout the steel industry. It has created an enormous backlash from European automobile producers. The European Automobile Manufacturers Association (ACEA) does not know what to think. They argue that these tariffs will cause market prices to rise throughout Europe. Carmakers get around 90% of their direct steel procurements from within the EU. If prices do go up, the American public will be the first to pay.
As ACEA representatives highlighted, “The dramatic lowering of quotas and the doubling of the out-of-quota tariff to 50% will significantly reduce the possibility to relieve pressure in the European market through imports.” Sigrid de Vries, ACEA Director General, further remarked, “We feel that the parameters as proposed by the Commission go too far in ring-fencing the European market. We need to find a better balance between the needs of European producers and users of steel in this measure.”
Norway, Iceland, and Liechtenstein are members of the European Economic Area (EEA). At the same time, they won’t have to shoulder the burden of the new quotas or duties, raising questions about the competitive advantage these countries will have over U.K. producers.
The impact of these tariff hikes goes far past the steel and automobile industries. It has the potential to affect the U.K. economy as a whole in equally profound ways. Business leaders are closely monitoring how these tariffs may influence supply chains and operational costs across various industries reliant on steel.