EU demands permanent exemption from U.S. steel tariffs

In response to the Whilte House announcement to extend until June 1 the European Union (EU)'s exemption from U.S. steel and aluminium tariffs, the EU on Tuesday demanded that Washington grant it permanent exemption, saying that it won't negotiate under threat.

"The U.S. decision prolongs market uncertainty, which is already affecting business decisions. The EU should be fully and permanently exempted from these measures, as they cannot be justified on the grounds of national security," said the European Commission in a statement shortly after the temporary extension.

"As a longstanding partner and friend of the US, we will not negotiate under threat. Any future transatlantic work program has to be balanced and mutually beneficial," said the statement.

The glory of the transatlantic relationship has further faded recently due to the deepening trade row between the two sides, with the United States accusing the EU for taking America's advantage with unfair tariffs while the latter blame the former for too much protectionism and "blackmailing".

In 2017, the 28-nation bloc exported 5.99 billion U.S. dollars worth of steel products to the United States, and 1.25 billion dollars of aluminum, making it the top exporter of steel to the United States and the fifth largest aluminum exporter.

Since U.S. President Donald Trump announced the planned tariff-hike in early March, the EU has been fighting for a permanent exemption.

Last week, French President Emmanuel Macron and German Chancellor Angela Merkel went to Washington to work out trans-Atlantic trade issues but left with empty hands.

To show a united front, Merkel, Macron and British Prime Minister Theresa May on Sunday warned after a joint phone call that "the United States should take no trade measures against the European Union or else the European Union should be ready to defend its interests within the framework of the multilateral trade order."

LINGERING PAIN

The White House's Monday announcement gave the EU a lingering pain more than a sigh of relief.

Shortly after the announcement, EU's top three economies -- Germany, France, and Britain -- voiced their demand for permanent exemption one after another.

Calling the renewed exemption as "positive", the British International Trade Department said in a brief statement that Britain "will continue to work closely with our EU partners and the U.S. government to achieve a permanent exemption, ensuring our important steel and aluminum industries are safeguarded."

"We remain concerned about the impact of these tariffs on global trade and will continue to work with the EU on a multilateral solution to the global problem of overcapacity, as well as to manage the impact on domestic markets," said the statement.

Requesting permanent exemption, Germany also warned "neither the European Union nor the United States can have an interest in an escalation in trade relations."

"Rather, both the U.S. and the EU would benefit from further deepening trade relations. It is particularly important that the European Union has sought talks with the United States and will continue to do so," said Germany's Deputy Government Spokeswoman Martina Fietz in a statement.

The German export-oriented economic model is facing a massive attack this year, said Sebastian Heilmann and Guntram Wolff, senior research fellows with Bruegel think tank based in Brussels.

"It should reduce the vulnerability of its export industry by promoting domestic growth and investment in Germany and in Europe. At the same time, Berlin should push for a more ambitious national and European innovation policy as well as a resilient European foreign trade policy," said Heilmann and Wolff in a joint article published on Bruegel's website.

Meanwhile, French finance and foreign ministries on Tuesday said in a joint statement that "We agree that there is a problem of overcapacity in steel and aluminum. We are ready to work with the USA and other partners to deal with those issues, and to develop fast and appropriate solutions."

"But we can only do so serenely when we are certain that we will be excluded from a unilateral increase in tariffs on a permanent basis," said the statement.

In its statement, the EU said its Trade Commissioner Cecilia Malmstrom has been in contact with U.S. Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer over the past weeks, and these discussions will continue. But as the flicking-dandruff-off-jacket chemistry between Macron and Trump fades, the following negotiation in the "final 30 days" is expected to be bumpy, according to observers.