EU cuts tariff-free steel quotas by 47% and doubles above-quota tariffs to 50%

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BRUSSELS — The European Union has reached deals with a dozen close trading partners for smaller reductions in tariff-free steel import quotas, while China and other countries will bear the brunt of cuts under a new market access regime.

The new steel quotas will reduce overall tariff-free quotas by 47 percent while tariffs on imports above those quotas will double to 50 percent from Wednesday. The measure seeks to shelter the European steel industry from global overcapacity, while inflicting less pain on countries that have free-trade deals with the EU.

The quota allocations, which followed months of secretive negotiations at the World Trade Organization’s headquarters in Geneva, were closely held and only disclosed when the implementing regulation was published in the EU’s Official Journal on Tuesday.

Overall, the EU will import 18.3 million metric tons without tariffs, with half going to its preferential trade partners and the other half distributed more broadly. China, the world’s largest steel producer, faces some of the biggest cuts as it has no trade deal with the EU. It will only get a tariff-free allocation of 800,000 tons, down from 2.4 million tons previously — a fall of two-thirds.

The decision comes a day after Chinese Commerce Minister Wang Wentao visited Brussels for talks with EU trade chief Maroš Šefčovič at which the two agreed to set up a new Trade and Investment Consultation Mechanism that aims to manage deepening trade frictions.

Šefčovič, in a statement , said the EU was “providing market participants with predictability through clear and transparent quota distribution rules, while applying a fair and objective methodology.” He also sought to fend off potential objections from countries that turned down a deal by saying the quota allocations complied with World Trade Organization rules.

The quota reductions were not directed against China, a senior EU official reiterated.

“I do want to dispel the idea that this is only about China. The non-market part is driven more by China, but the structural nature of overcapacity is also present in other countries,” the official told a briefing, speaking on condition of anonymity as is customary in Brussels.

Pain for Ukraine

Given the scale of the cuts, nobody was going to come away happy, with the EU executive only offering to soften the blow for FTA partners if they signed up to a waiver of their right to challenge them either bilaterally or at the WTO. Thirteen countries took the deal and will finalize terms and political formalities in the coming months.

The EU reached agreements in principle on market access with most of the free-trade partners it negotiated with, a senior official said. These included Turkey, India, Korea, Indonesia, Egypt, Brazil, the U.K., Switzerland, North Macedonia, South Africa, Argentina, Ukraine and Singapore.

For the U.K., the reduction in access to the EU market worked out at a reduction of less than a quarter from last year’s volumes. Both Business and Trade Secretary Peter Kyle and the U.K. steel industry called for further talks with Brussels to get a better deal.

FTA partners that took the deal will see their historical tariff-free volumes cut by one-third on average, compared with two-thirds for non-FTA partners such as China. Free-trade partners that declined the deal will fall in between, with their tariff-free quotas cut by half. Japan and Vietnam are expected to fall into this category after turning down a deal.

Ukraine was also hit hard by the EU measure as it was granted only 1 million tons, less than half of what it exported to the bloc last year.

That number is derived from the lower volumes the country exported to Europe from 2022 to 2024, the reference period used by Brussels to calculate the quotas. Ukraine’s exports actually surged last year to 2.2 million tonnes, meaning its steelmakers are bound to lose market share.

Lead lawmaker on the file, Swedish liberal Karin Karlsbro, said Tuesday’s conditions confirmed her worst fears on Ukraine.

“This decision will have immense consequences for the Ukrainian steel industry and the country’s economy, ultimately affecting Ukraine’s resilience and ability to finance its fight for existence,” said Karlsbro, who plans to speak with Šefčovič on Thursday.

Pain for Ukraine

Ukraine will still be able to access a pool of residual quotas that are open to the countries that did a deal with the EU. The eventual tariff-free exports might therefore end up higher.

But for Kyiv, the real discussion is a different one: EU membership.

Deputy Prime Minister Taras Kachka said Kyiv views “the current arrangement as a starting point,” and that the final deal “should take into account Ukraine’s path towards EU accession, the logic of deeper economic integration, and the perspective of full access to the EU internal market.”

Ukraine was given some preferential treatment by the EU, a second senior official explained. That’s because the reference period, which overlaps with the start of Russia’s full-scale invasion, could not be adjusted. But Ukraine did receive some bilateral quotas in categories for which it formally did not qualify because its share of supplies was below a 5 percent threshold.

The first official said the EU was not looking to grant other industries similar protection but rather that it remains open to working together with other economies to address global steel overcapacity.

“Call it a club, call it an alliance, call it whatever you like: The idea that we come together with like-minded partners on this global challenge of overcapacity,” they said. “In an ideal world, there is fair competition and a level playing field. Unfortunately, we don’t seem to live in an ideal world.”

This article has been updated.