The European Union is preparing to propose a significant escalation in tariffs on steel imports, doubling the current rate from 25% to 50% to combat global overcapacity and prevent trade diversion, according to a draft document reviewed by Bloomberg News. The European Commission, the EU's executive body responsible for trade policy, aims to unveil the details next week, replacing a temporary safeguard measure set to expire in 2026 with a more permanent framework. This move aligns the bloc's protections with recent U.S. actions targeting excess supply, particularly from China, which has flooded markets with low-cost steel, threatening domestic producers.

Under the existing system, introduced in 2018 amid U.S. tariffs under President Donald Trump, the EU imposes quotas on steel imports from all countries except the U.K. Once these limits are exceeded, a 25% ad valorem duty applies to additional volumes. The proposed overhaul would maintain quota-based access but elevate the tariff to 50% post-quota, specifically to deter rerouting of surplus steel through third countries. The Commission plans to set product-specific quotas based on historical import averages from 2021 to 2024 and seek authority for country-specific limits, enhancing flexibility to address surges from high-risk origins.

The initiative stems from escalating global steel trade tensions, exacerbated by China's state-subsidised production, which accounts for over half of worldwide output. The EU's steel sector, employing around 300,000 people and contributing €50 billion annually to the economy, has faced declining competitiveness, with imports rising 7% in 2024 despite safeguards. By mirroring U.S. Section 232 tariffs at 50%, Brussels hopes to shield its industry from dumping while complying with World Trade Organization rules. However, the hike could raise costs for EU manufacturers reliant on imported steel, such as automotive and construction firms, potentially fuelling inflation in downstream sectors.

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Stakeholder reactions remain mixed. Eurofer, the European Steel Association, welcomed the proposal as "essential for fair competition," urging swift adoption to counter "unfair trade practices". Conversely, trade-dependent nations like Turkey and India, major EU suppliers, expressed concerns over disrupted supply chains. The Commission emphasises that the measure promotes sustainability by encouraging greener steel production within the bloc, aligning with the EU's Carbon Border Adjustment Mechanism.

As details emerge, negotiations with member states and potential retaliatory risks from trading partners will shape the final instrument, underscoring the EU's balancing act between protectionism and open markets in a fragmented global economy.

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