The trade meeting that metal investors need to watch

Discussions on business meetings are usually greeted with a yawn and a click on the next news item. However, last week’s meeting between the EU and the US in Pittsburgh could be an event to watch.

The EU, the US and the fate of Article 232

The Inaugural Trade and Technology Council (TTC) The meeting brought together both Commerce Secretary Gina Raimondo and US Trade Representative Katherine Tai, while the EU delegation included Trade Chief Valdis Dombrovskis.

So, in theory at least, that’s enough political weight to have meaningful negotiations.

And what is there to negotiate, you will ask me? In short, those Trump-era US tariffs on European steel and aluminum.

In 2018, former President Donald Trump imposed high tariffs on steel (25%) and aluminum (10%) imports from Europe and other countries for national security reasons (using section 232 of the Trade Expansion Act 1962). If a solution has been found with Canada and Mexico, there is not one with Europe, a the recent Financial Times report indicates.

In May of this year, the two sides reached a relaxation. Europe has agreed to delay raising its retaliatory tariffs on clothing, bourbon and motorcycles until December 1.

But time is running out.

EU trade chief Dombrovskis said the EU had to decide what it was going to do about the deadline by early November.

U.S. Perspectives on Section 232 Tariffs

Will the Biden administration lower tariffs?

Many heavy consumers of metals would like them to do this. However, there is little chance that this will happen.

The tariffs have the backing of many steel and aluminum plants in states where the president wants to own or earn next year. Alienating these voters is the last thing he thinks of. The United Steelworkers also support tariffs, as does the AFL-CIO. Once again, Biden won’t want to lose union support when he has done so much of his trade policy being “worker-centered”.

Alternative resolutions

So what other solution could there be?

The favorite seems to be some sort of quota system, much like the Canada-US aluminum deal. These quotas are generally based on an average of the last three years. Of course, the past three years have been skewed by those same tariffs and a global pandemic. Behind-the-scenes negotiations can be about a timetable that would be politically acceptable to both sides.

Another thorny subject of agreement is that of rules of origin. However, there is little evidence of violations, the United States in particular is likely to want to see increased surveillance backed by regulation to ensure that non-European material is not simply routed across the continent as if it were. European.

The European anti-dumping tariffs introduced in the last 12-18 months will help in this regard. Both regions face the same problem of dumped or low priced imports. In addition, both are keen to ensure a level playing field for their domestic producers. The principles, if not necessarily the rules, are aligned here.

So watch this space, because it might not be “just another talking shop”. If the two sides come to an agreement, the resumption of Section 232 duty-free imports for steel and aluminum could have a significant impact next year.

European factories, especially aluminum factories, have few precious metals to offer at the moment. Any change in supply would likely be gradual, but could herald a return to some degree of normalcy between the two trading blocs later next year.

By Stuart Burns via AG Metal Miner

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