Europe’s steel tariffs: a necessary adjustment in a distorted global market

The European Commission’s proposal to introduce tariffs on steel imports represents a necessary adjustment in the EU’s trade and industrial policy. It addresses structural imbalances in the global steel market and the need to ensure fair competition for European producers.

For an open and export-oriented economy such as Luxembourg’s, open trade remains essential, but it must take place under fair and predictable conditions.

The challenge for Europe is therefore to find the right balance between openness and protection, ensuring that competitiveness is preserved across the entire industrial value chain. The proposal thus represents a pragmatic step toward restoring fair competition while preserving Europe’s industrial base.

A changing global landscape

Over the past two decades, the structure of global steel production has changed profoundly. In 2000, China accounted for around 15% of world output; today, its share exceeds 50%. This rapid expansion has created chronic overcapacity, estimated at several hundred million tons, which weighs on prices worldwide.

Chinese producers, often benefiting from state support and very large economies of scale, are able to export steel at prices that often do not fully reflect production and environmental costs. As a result, European producers face difficulties operating at sustainable capacity levels. Current utilisation rates in the EU hover around 65%, well below the 80–85% generally needed for long-term viability.

The EU’s proposed mechanism

The commission’s proposal introduces a tariff rate quota (TRQ) system that distinguishes between normal trade flows and potentially market-distorting surges. Around 18 million tons of steel, equivalent to the combined annual output of France, Belgium and Luxembourg, would continue to enter the EU market tariff-free. Imports exceeding that threshold would be subject to a 50% tariff.

This approach differs from the United States’ Section 232 measures, which apply a uniform tariff across nearly all imports. The EU’s design aims to remain consistent with World Trade Organization rules, while ensuring that its market does not become the outlet for global overproduction. The inclusion of a “melted and poured” clause, designed to trace the true origin of imported steel, should also help to prevent circumvention, which currently occurs through third countries such as Taiwan, Indonesia, Vietnam or Turkey.

The proposal also highlights the pressing need to address these distortions. For the measure to be effective, it should thus be adopted without delay, making use of the EU’s accelerated safeguard procedure.

Balancing interests along the value chain

While the logic of defending fair competition is clear, the measure may also have consequences for downstream industries. Many European companies, including suppliers based in Luxembourg, serve sectors such as automotive, machinery and construction, all of which rely on access to competitively priced steel.

Higher import costs could affect their competitiveness, particularly in export markets where rivals benefit from lower input prices. Neighbouring countries with closely integrated supply chains, such as Switzerland or Norway, may also experience indirect effects. These interdependencies highlight the importance of close coordination with Europe’s trading partners.

For this reason, careful monitoring will be essential during implementation to ensure that the measure supports fair competition without inadvertently disrupting well-functioning parts of the European industrial ecosystem.

The need for a broader industrial perspective

Trade defence instruments can provide temporary relief, but on their own they cannot resolve Europe’s structural challenges. The steel issue illustrates the need for a comprehensive industrial strategy that integrates the entire value chain. Measures to safeguard production capacity should be accompanied by initiatives that strengthen investment, support innovation, and facilitate the green transition.

Investment remains a critical gap: while China invests around 40% of its GDP, Europe and the United States invest roughly half that proportion. Without a significant increase in productive investment, Europe risks falling behind in key technologies and industrial capabilities. The upcoming Steel and Metals Action Plan should form part of this broader effort.

In parallel, the EU could explore policies that promote local value creation. Such measures would align with global practices and contribute to building industrial sovereignty without undermining trade commitments.

Looking ahead

The introduction of import tariffs should be seen not as an end in itself but as one component of a broader policy framework. Ensuring Europe’s resilience will depend on balancing three objectives: openness to trade, competitiveness of downstream industries, and the long-term sustainability of domestic production.

Ultimately, a competitive European steel industry is essential not only for economic reasons but also for achieving the EU’s broader climate, social, and strategic objectives. In the long run, maintaining that capacity within Europe is an investment in the continent’s industrial strength and overall future.

Yves Germeaux is head of trade and international relations at industry federation Fedil.

This piece is a guest contribution. All opinions are edited for grammar and style, and fact-checked, but the opinions are the writer’s own.