London — The US will not impose tariffs on imports of aluminum or steel from the EU until June 1, after extending an exemption set to end Tuesday, the European Commission said.
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"The US decision prolongs market uncertainty, which is already affecting business decisions. The EU should be fully and permanently exempted from these measures, as they cannot be justified on the grounds of national security," the EC said.
A 25% tariff on steel imports to the US and 10% tariff on aluminum went into effect March 23 as a result of Commerce's Section 232 investigations into the effect of these imports on US national security.
Argentina, Australia, Brazil, Canada, Mexico, South Korea and the EU were granted temporary exemptions until May 1 unless a longer-term agreement had been reached.
The EC said overcapacity in aluminum and steel markets had not originated in the EU, adding: "The EU has over the past months engaged at all possible levels with the US and other partners to find a solution to this issue."
"The EU has also consistently indicated its willingness to discuss current market access issues of interest to both sides, but has also made clear that, as a longstanding partner and friend of the US, we will not negotiate under threat. Any future transatlantic work program has to be balanced and mutually beneficial," the EC said.
European Commissioner for Trade, Cecilia Malmstrom, has been in contact with US Commerce Secretary Wilbur Ross and US Trade Representative Robert Lighthizer over the past few weeks, the EC said, adding discussions will continue.
The EU along with Canada and Mexico have been granted a second extension, to make the case they should be exempt from tariffs recently imposed by the US and find a satisfactory alternative, the White House said.
REACTION
EU steel producers exported around 5 million mt of products to the US last year, European steel association Eurofer said in a note, seen by S&P Global Platts, which welcomed the US move even if it was only a "temporary" extension.
Eurofer said the EU has been a reliable US partner and there were no grounds for the EU not to be excluded. Its Director General, Axel Eggert, said in the note Eurofer supported the EC's work in making sure the "US is aware it cannot take unilateral measures without trade consequences".
Eurofer also expressed its concern there could be a surge in imports into the EU from countries hit by the US tariffs.
"The EU's possible safeguard measure should be broad and cover a wide scope of products whilst maintaining access to traditional trade flows. It is important to stress that any safeguard -- which remedies import surges -- would be independent of whether the US gives the EU and exemption, either now or next month", Eggert said.
Meanwhile, German steel federation WV Stahl said while the extension would provide "another brief breather", the EU would have to act quickly to put safeguard measures in place.
Germany's government had been pushing for new trade talks similar to the Transatlantic Trade and Investment Partnership (TTIP) in recent days. The idea, dubbed 'TTIP light', would lower or abandon tariffs on specific products.
US President Donald Trump has repeatedly criticized duties on US car imports to the EU.
EU producers supplying their US sites with European material have been preparing for a worst-case scenario, sources said.
To keep exports to the US going even if Section 232 tariffs are imposed on the EU, some US-based subsidiaries of European mills have been formally applying for a product specific exemption.
"You have to have a processing base in the US to apply. If not, [EU] steel mills can only ask their customers to apply for one. But they are not going to do that," said a source at a German mill.
European Aluminium's Director General, Gerd Gotz, said: "Unfortunately, the future of our strongly interlinked transatlantic value chains is still clouded in uncertainty. Our industry needs stability to fully benefit from the growing demand for aluminum for strategic applications in packaging, mobility, construction and the electrical sector." The association said there was a risk emerging for Europe from a potential redirection of aluminum from third countries targeted by the tariffs.
"In addition to the potential trade diversion, the European aluminum value chain is already in a vulnerable state due to the unsustainable increase of overcapacity in China in both the primary and semi-fabricated aluminum sectors...The tariffs only divert the attention from finding a global solution to the global issue of Chinese overcapacity, which is the root cause of imbalances in our markets," Gotz said.
"We count on the EU Commission and the member states to continue to work hard for a permanent exemption and take appropriate and commensurate safeguard measures if the prior surveillance proves an imports surge causing injury to our producers."
--Sarah-Jane Flaws, sarahjane.flaws@spglobal.com
--Vicky Bakourou, vicky.bakourou@spglobal.com
--Annalisa Villa, annalisa.villa@spglobal.com
--Laura Varraile, laura.varraile@spglobal.com
--Edited by Dan Lalor daniel.lalor@spglobal.com