The European Union faces a major setback in trade negotiations with the United States, as a new draft agreement fails to reduce the punishing 50% steel tariff first introduced by Donald Trump. The deal, intended to ease tensions and prevent a transatlantic trade war, keeps steel tariffs at a level industry leaders say could devastate European manufacturing.
Despite EU efforts to strike a compromise, the current proposal allows the 50% levy to persist on steel exports above a set quota. While some goods benefit from a reduced baseline tariff of 15%, steel remains a glaring exception — even as British steel producers enjoy a comparatively lower 25% rate, set to drop to zero under the May trade deal secured by UK Prime Minister Keir Starmer.
The EU’s steel producers, already grappling with soaring energy costs and Chinese overcapacity, warn that they are nearing a breaking point. “This tariff is catastrophic,” said Eurofer, the EU’s main steel industry group, which cautioned that Europe’s steel sector is being squeezed from both sides — losing access to U.S. markets while contending with Chinese steel flooding into Europe.
Meanwhile, China and Europe remain at odds over trade imbalances and rare earth export restrictions. Chinese President Xi Jinping urged European leaders to resist U.S. pressure and avoid strategic missteps, while EU Commission President Ursula von der Leyen pointed to state subsidies and market barriers as key contributors to the current imbalance in trade.
With pressure mounting from both Washington and Beijing, EU leaders like Germany’s Chancellor Friedrich Merz are eager to finalize a deal — even one with painful compromises — to restore stability and investor confidence. Talks continue, but without a breakthrough on steel tariffs, Europe’s industrial backbone may be in jeopardy.
