LONDON: The United Kingdom is drawing up countermeasures against the European Union’s proposed steel tariff increase in the event that Prime Minister Keir Starmer cannot secure a deal to blunt their impact.
Britain is mulling retaliatory actions after its domestic metals industry warned that European plans could precipitate the biggest crisis in its history, according to sources.
The European Union unveiled plans last month to cut existing tariff-free quotas on foreign steel almost in half and double levies to 50% above those thresholds.
The British government is also looking at how to accelerate the replacement of its own steel safeguards and tighten import quotas, said the sources.
Those existing measures are due to expire in June.
“This government has shown its commitment to the steel industry by securing preferential access to the US market for exporters, and we continue to explore stronger trade measures to protect our steel producers from unfair behaviour,” the UK government said in a statement, affirming its desire to address issues of overcapacity in the sector.
“We are continuing our engagement with the European Union following their recent announcement.”
While the sources didn’t elaborate on what sort of retaliation the government was considering against Europe, any escalation would represent a shift by the United Kingdom side, which has so far sought to avoid being drawn into trade wars prompted by US President Donald Trump.
It would raise fresh questions about Starmer’s effort to rebuild ties with Brussels in the wake of Britain’s exit from the European Union almost six years ago.
Increasing European tariffs on British steel would violate the spirit of the reset agreement reached between the two sides in May, one UK government official said.
The joint statement released by Starmer and European Commission President Ursula von der Leyen in London at the time affirmed their “mutual commitment to free, sustainable, fair and open trade” and safeguarding supply chains.
European Commission spokesman Olof Gill said the “European Union will engage with all its free trade agreement partners in good faith, explain the measure and its implications, and discuss the way forward.”
At the same time, Gill said the bloc would continue to emphasise the need for a collective solution to address global overcapacity. Starmer is expected to cross paths with European leaders at the Group of 20 summit in South Africa later this week.
The United Kingdom is also seeking a compromise to join Europe’s flagship defence fund after rejecting Brussels’ demands for as much as €6.75bil to participate, Bloomberg reported last week.
The United Kingdom has been swept up in the European Commission’s efforts to protect its own steel industry from global overcapacity as it grapples with Trump’s global 50% steel tariff.
That has raised the risk of cheaper metals from China and other Asian economies flooding into the European market.
The European Union currently has a temporary mechanism in place to safeguard its steel industry, which imposes a 25% duty on most imports once quotas are exhausted.
That mechanism expires in June, and the European Union has been working to replace it with more permanent regulation.
The United Kingdom claimed earlier this year that its departure from the European Union meant it could secure a better steel tariff rate from the United States of 25% since it was no longer bound by the bloc’s trade policy.
However, it also lost its protections from Europe and became vulnerable to changes in the bloc’s own steel safeguards.
An assessment by the UK government found that Europe’s new measures would have a significant impact on the little remaining steel production in Britain, a pioneer of the industry in the 19th century.
The European Union is a critical market for the strategic sector, with more than three-quarters of UK finished steel exports going to the bloc last year.
“This is perhaps the biggest crisis the UK steel industry has ever faced,” UK Steel director-general Gareth Stace said in October.
“The government must go all-out to leverage our trading relationship with the European Union to secure UK country quotas or potentially face disaster.” — Bloomberg
