Knock, Knock. Who’s there? It’s the ghost of trade wars past, haunting our Halloween with a spine-chilling tale of job-killing tariffs and retaliation.
The EU and the U.S. find themselves entangled in a web of uncertainty, and it’s no treat for anyone involved.
Picture this: a moonlit night, shadows creeping, and the fate of billions in commerce, jobs, and supply chains hanging in the balance. The scariest part? The government caused this nightmare and says it’s going to fix it too.
In October 2021, the EU and the U.S. announced a deal that had the promise of a sweet candy treat: replacing those dreaded Section 232 (National Security) tariffs with “tariff-rate quotas.” But it was Faustian bargain, the deal conditioned finding a “Global Steel and Aluminum Arrangement” that would protect the climate – or all the US tariffs and EU retaliation strike back on Halloween night.
Fortunately, the headless horsemen and headless horsewomen in the Biden administration saw that re-imposing tariffs that killed jobs and investment on both sides of the Atlantic, on Halloween night was a bit too on-the-nose. With only a few days to go they decided to push the deadline back to… checks notes… Christmas.
Now, you might be wondering, why is a Global Steel and Aluminum Arrangement so elusive and what’s so scary about it? First, the tariffs were justified explicitly as matter of national security, to protect the American steel and aluminum industry. This barely passed the smell test, Europe is a member of NATO, a defense ally, and the Defense Secretary, at the time, General Mattis, stated only 3 percent of U.S.-made steel is needed to meet defense requirements.
The 232 report argued the global tariffs of 25 percent on steel and 10 percent on aluminum were necessary to protect domestic plants from closing due to “excess supply” from abroad.
However, very quickly, nearly every trade partner the U.S. imported steel and aluminum from reached a deal to exclude it from the tariffs by promising not to export to the U.S. more than it usually does—a virtual admission the “boogie man” national security threat was nothing more than the government wearing a white sheet.
Yet, the EU held to its principles, it was also America’s largest import partner for the metals and had the most to lose by agreeing to a voluntary restriction. The EU fought the tariffs by imposing $4 billion in retaliatory tariffs on everything from American whiskey, motorcycles, and agricultural products.
Secondly, when the temporary ceasefire was called, the Biden administration claimed to fix the “problem” with a spell, turning the “national security” threat of overcapacity into a commitment by the EU to work with the U.S. to combat climate change caused by high-carbon steel and aluminum.
The White House does not have marching orders from Congress to negotiate a “green steel deal” (Article I Section 8 of the constitution gives Congress the power to “regulate commerce with foreign nations), nor does Section 232 of the 1962 Trade Expansion Act or the report from Commerce recommending the tariffs declare climate concerns from steel and aluminum production a national security threat.
It is a genuine Swamp Monster that would put Dr. Frankenstein to shame.
To make matters worse, the White House has kept their proposals to the EU shrouded in cloak and dagger (as a national security issue, it has escaped Congressional oversight). What we do know are the reactions from Europe, which has rejected every U.S. offer, saying they breach WTO rules by carving out special exemptions for American steel and aluminum in Europe’s own Carbon-Border Adjustment measure known as CBAM.
It was not shocking when the WTO determined the tariffs violated WTO rules, however, the U.S. rejection that called the body “ineffective” and defended its right to use magic words to impose tariffs did catch centrists by surprise, saying it “signal[s] abandonment of the rules-based trading system and a return to the law of the jungle.”
As a reminder, U.S. importers paid virtually the full cost of the tariffs, an additional $3.8 billion in, 2.4 billion due to steel and aluminum imports from Europe. There are many more American manufacturers employed in steel and aluminum using firms than in plants that produce and refine the metals- these tariffs raise their costs and hurt their bottom line. That’s led to a reduction of 75,000 manufacturing jobs, each job saved by the tariff came at the haunting price of $650,000.
When late December comes around, the United States and Europe should celebrate the holidays together by renouncing this trade war that has wasted so much time and energy. Save us from a solution that would only amount to a massive tax hike on our crucial industries- which are already the greenest in the world.