While speaking with reporters on Monday February 3, Trump stated that tariffs on EU goods would happen “pretty soon” because of what he perceives as a negative trade balance between the US and EU.
His comments have intensified speculation over the impact of potential tariffs targeting European ferrous exports to the US.
They also sparked a response from the president of the European Commission, Ursula von der Leyen, who said the bloc is ready to engage in “tough negotiations” with Trump.
How could steel tariffs affect Europe?
Europe’s steel industry, already grappling with weak domestic demand, high costs and overcapacity concerns, now faces the added pressure of potential disruptions to a key export market.
The EU is a clear net exporter of steel to the US. Exports of iron and steel products under harmonized standards (HS) code 72 from the EU to the US totaled 3.60 million tonnes in January-November 2024, while the EU imported 797,980 tonnes from the US over the same period, according to data from Eurostat, compiled by the Global Trade Tracker (GTT).
Total global exports from the EU under code 72 were 37 million tonnes in January-November 2024, with ferrous scrap exports making up 20.80 million tonnes. The US was the second largest recipient of EU iron and steel exports.
“It can really have an impact, because there are some mills in Europe who are exporting to the US. If they can’t anymore, prices in Europe could collapse,” a European steel trader told Fastmarkets. “Everybody is unsure.”
But other European steel market sources remained reserved in their assessments of the impact of any possible tariffs on the EU market.
“We’ll see what the actual tariffs will look like,” a buyer in Europe said. The source questioned the competitiveness of EU exports and said they did not think tariffs would have a direct impact on steel sales.
“What we have to be conscious of is the potential diversion of trade flows into Europe in case Trump decides to implement massive tariffs on Asian steel,” the buyer in Europe said.
A second trader expressed less concern over Trump’s threats, noting that the US is a net importer of steel and will still need foreign materials.
The US’ negative trade balance might lead to tariffs driving up inland steel prices within the US, with its industry bearing the brunt of the cost, the second trader said.
“They are not able to produce [enough to satisfy all] the steel demand in the country, so they need the imports anyway,” they added.
But the EU faces stiff competition from other large suppliers to the US, such as Canada, Brazil, Mexico, South Korea and Vietnam.
Of the EU steel exports to the US, the majority of the volume was flat-rolled steel products under HS code 7210 and flat-rolled alloy steel products under code 7225. Next up was ferrous scrap under HS code 7204, with 331,081 tonnes.
US steelmakers typically import prime-grade ferrous scrap from EU countries, such as No1 busheling and No1 bundles material, which are high yield and low in impurity, making them ideal for use in flat steel production at US electric-arc furnaces (EAFs).
Fastmarkets senior analyst Alex Kershaw noted that trade flows could shift significantly if the tariffs are implemented and if the EU responds with retaliatory measures, with EU scrap exporters likely to redirect volumes to alternative markets such as Turkey, Egypt or India.
Steel exports represent a much larger share of EU exports to the US than scrap, meaning that steel trading patterns could also shift dramatically if tariffs are imposed, he added.
How well are EU markets protected?
Should the US hit EU steel with fresh tariffs, some believe that the European market has a stronger defense now than in 2018, after the unilateral US decision to impose tariffs of 25% on steel and 10% on aluminium imports from Canada, Mexico and the EU under Section 232.
“The EU market is better protected now. And will be even better shielded as of April 1, when reviewed safeguard measures come into force,” a second buyer said.
Indeed, the EU’s existing steel safeguards measures were first implemented in 2018 in response to the US Section 232 tariffs.
On October 30, 2021, the US and the EU then agreed to replace Section 232 steel and aluminium tariffs against the bloc’s 27 countries with tariff-rate quotas.
The measures have been extended several times and are currently under review, expected to be concluded by March 31, with any adjustments to the current measures expected to come into force the following month.
Market participants in Europe said the review might involve a reduction in quarterly hot-rolled coil quota allowances and the introduction of new individual quotas for certain origins.
UK trade relations: a different approach?
Trump’s stance on UK trade remains ambiguous. The US president has spoken of having a positive relationship with British Prime Minister Sir Keir Starmer and suggested that trade tensions with the UK might be more easily resolved than with the EU.
“The UK is out of line. But I’m sure that one, I think that one, can be worked out,” Trump said, hinting at the possibility of negotiations to avoid the same punitive measures that may hit the EU.
While UK exporters have been closely monitoring developments, many remain cautious given the volatility of Trump’s trade policies.
The UK is a much smaller exporter of iron and steel to the US compared with the EU, which suggests that tariffs targeting the EU could have a much more pronounced impact on the European bloc’s steel market than it would the UK.
In January-November 2024, the UK exported 190,351 tonnes of iron and steel products to the US under HS code 72, including 75,386 tonnes of ferrous scrap, according to data compiled by GTT.
For context, the UK’s total global iron and steel exports amounted to 9.15 million tonnes over the period, with ferrous scrap making up a whopping 6.92 million tonnes.
The US was only in 12th position among all buyers of UK ferrous products under code 72 over the eleven-month period. On the other hand, the UK imported only 9,344 tonnes of US ferrous products under the same HS code, according to data from the GTT, from a total import volume of 5.89 million tonnes.
This data suggests a very wide imbalance in the UK-US steel trade, even if at much smaller outright volumes than the EU-US link.
So is the UK going to be safe from tariffs? To what extent will Trump apply tariffs to EU goods? And will these also affect ferrous shipments?
There are many questions, but for now, very few answers. Until more concrete policy is determined by the US government, steel market participants across Europe are set to remain in a cautious wait-and-see mode.
