Details of the U.S.-EU Aluminum and Steel Tariff Rate Quota System

Executive Summary

• The United States reached an agreement to replace tariffs on European aluminum and steel with a tariff rate quota system (TRQ), which will eliminate tariffs on aluminum and steel imports from the European Union up to a certain amount per year; in return, the European Union will cancel retaliatory tariffs on $3 billion worth of imports from the United States.
• The U.S. agreement’s two main stated goals are to reduce carbon emissions from the production of aluminum and steel and to reduce costs for U.S. businesses and consumers.
• By using these tariffs to pursue its climate priorities, the Biden Administration is overstepping the authority vested to the executive branch by Congress to set trade policy.
• Although the U.S. agreement will reduce costs associated with the tariffs, the tariff rate quota system will encourage market manipulations that lead to higher costs and uncertainty for U.S. companies.

Introduction

On October 29, 2021, the United States announced it will replace the Section 232 tariffs it had imposed on aluminum and steel imports from the European Union (EU) with a new tariff rate quota system (TRQ). In return, the European Union cancelled retaliatory tariffs on $3 billion worth of imports from the United States. The TRQ will go into effect on January 1, 2022. The Section 232 tariffs on aluminum and steel imports from most other countries are still in effect and will not change unless those countries agree to a similar deal with the United States.

The Biden Administration states this agreement will create a framework starting in 2024 for the United States and EU to lower carbon emissions from the production of aluminum and steel. The idea is to increase the use and trade of each other’s aluminum and steel, and to lower demand for China’s aluminum and steel which emit more carbon.[1] Regardless of the carbon emissions outcomes from this agreement, these Section 232 tariffs are intended only to be used to protect national security interests. Much like the Trump Administration, the Biden Administration is overstepping its authority in trade policy because it is pursuing interests that have nothing to do with the original intent of the tariffs. The Biden Administration also states this agreement will lower costs for U.S. consumers and businesses. While TRQ will lower the amount U.S. companies pay due to the tariffs, the TRQ will lead to market manipulations that will conversely raise costs and create new uncertainties for U.S. businesses.

How the Tariff Rate Quota System Works

The TRQs on aluminum and steel will go into effect on January 1, 2022, and apply only to aluminum and steel from the EU. The Section 232 tariffs will still apply to aluminum and steel imports from most other countries.

Under the TRQ, there will be 54 categories for steel products and the annual import volume is set at 3.3 million metric tons (MMT), allocated by each EU state (the 3.3 MMT amount is based on 2015-2017 historical import figures). The TRQs on steel will be administered quarterly, and is a first-come, first-served system. Any amount of steel imported from the EU within the quota, will not be subject to the Section 232 25…