EU fails to reduce 50% steel tariff in draft US trade deal as industry warns of ‘catastrophic’ impact

The European Union has failed to secure any reduction in the punitive 50 per cent US steel tariff in the latest outline trade deal with Washington, leaving the bloc’s exporters facing one of the harshest trade penalties imposed by President Donald Trump’s administration.

Despite weeks of high-level negotiations and mounting pressure from European steelmakers, diplomats confirmed this week that the provisional agreement includes a 15 per cent baseline tariff on most EU goods—but crucially, steel remains excluded from the reduction.

“It includes a 15% baseline tariff on a range of goods, with notable exceptions such as steel, which remains at 50%,” a Brussels diplomat said.

The news has dealt a blow to the European steel industry, already under strain from high energy costs and rising imports of cheap Chinese steel. The sector had hoped for parity with Britain, which secured a 25 per cent steel tariff, now due to fall to zero under the bilateral deal agreed by Keir Starmer in May.

By contrast, the EU now faces a steel tariff twice the UK’s rate, prompting renewed warnings from Eurofer, the EU’s steel industry body, that the measures could be “catastrophic” for the sector.

Sources suggest that Brussels is still pushing for a quota-based compromise, whereby the 50% tariff would only apply to EU steel exports above a certain volume. However, there is no confirmation that this idea has gained traction with the US side.

President Trump reiterated his hardline position at an AI summit in Washington on Thursday, stating that countries without a signed agreement could expect tariffs “anywhere between 15% and 50%”.

Although EU diplomats stress that the agreement remains a draft and that tariff exemptions and adjustments are still under discussion, the current outline points to a deal in which the EU accepts steeper trade penalties than Britain in order to secure broader access to the US market.

The EU’s urgency to conclude a deal with the US comes amid escalating tensions with China, where a widening trade imbalance and restrictions on rare earth exports have placed additional pressure on European manufacturers.

Speaking at a trade summit in Beijing, European Commission President Ursula von der Leyen warned that the EU might find it “very difficult to maintain its current level of openness” with China unless it reduced its massive trade surplus.

“These numbers speak to the scale of our relationship, but they also expose a growing imbalance,” von der Leyen said, blaming Chinese state subsidies and market access barriers for the current deficit.

Amid the rare earth shortages, European carmakers have warned of potential production stoppages. German industry group VDA said electronic systems such as automated windows and boots were being affected by a lack of key components.

Von der Leyen said a “practical solution” had been reached at the summit, allowing car firms to request direct intervention to trace and resolve delays in rare earth shipments.

As pressure grows to reach a deal with Washington, Germany’s Chancellor Friedrich Merz is said to remain eager to secure a trade pact that would restore stability to investors and automakers, even at the cost of steep tariffs on steel.

Merz, who is believed to have a direct line to President Trump, is expected to use an upcoming visit to Scotland—where Trump owns two golf courses—as a potential opportunity to make a personal appeal.

“As we lose our major export market, the European market is being flooded by the steel the US is no longer absorbing,” Eurofer warned in a statement. “This is not sustainable.”

The European Central Bank, meanwhile, left interest rates unchanged on Thursday, as it monitors whether the fallout from US tariffs will impact eurozone inflation and industrial output.

Despite the mounting concerns, EU officials privately admit that a deal with Washington—however painful—may be the only way to avoid a wider trade war. With the US election cycle heating up, and Trump doubling down on his “America First” agenda, European leaders appear willing to accept painful compromises in exchange for broader market access and investor reassurance.

But with steel singled out for the harshest treatment, Brussels now faces political backlash from an industry that feels sidelined and exposed — and a brewing dilemma about whether trade peace is worth the price of sectoral sacrifice.

Read more:
EU fails to reduce 50% steel tariff in draft US trade deal as industry warns of ‘catastrophic’ impact