The EU will open an investigation against China over subsidies to metallurgists

A new investigation into China over its government’s possible subsidies to steel producers could be opened by the European Union (EU). The announcement is likely to be made at the EU-US summit in Washington on October 20, the Financial Times (FT) reported. It is alleged that such a request came from the Americans as a condition that Washington would not again impose tariffs on steel and aluminum from the EU, as it already did under the administration of President Donald Trump in 2018. Then the EU responded by imposing duties on a number of US products, as well as Levi’s jeans and Harley-Davidson motorcycles. But after Joe Biden came to power in October 2021, the parties agreed to suspend customs tariffs on steel and aluminum in order to work together on an agreement in this area.

Two years after freezing internecine trade disputes, the United States and the EU at a joint summit may announce the conclusion of a global agreement on sustainable steel and aluminum production (GSA), which will limit the export of Chinese metals, according to the FT material. It could later be joined by countries such as the UK and Japan if they also agree to impose tariffs on Chinese products. In addition, the US and EU will sign an agreement to freeze the foreign trade conflict while discussing the second part of the GSA, which includes issues of decarbonization of steel and aluminum production. The newspaper’s European sources believe that Biden will need to ensure the preservation of jobs in the steel industry – for example, in the states of Pennsylvania and Ohio – in order to increase his chances of winning the 2024 elections there.

Global steelmaking capacity reached a record level in 2022, according to the Organization for Economic Co-operation and Development (OECD). China accounts for 54% of global steel production. At the same time, metal export volumes from China in 2023 reached the highest level in six years. Previously, Brussels had repeatedly introduced and extended anti-dumping duties on 10 categories of steel imported from China and various quotas on certain types of goods (for example, only in June 2023, duties on a number of hot-rolled flat products were extended for five years).

A possible investigation by the European Commission into the Chinese government’s subsidies for local manufacturers will be the second such case: on October 4, the EU officially began conducting a similar investigation into Chinese electric vehicles. According to the notice published in the EU’s official journal, it will concern new battery-powered vehicles (BEVs) and the subsidies that the Chinese state may have provided to their manufacturers. Moreover, Brussels is considering an investigation into Chinese wind turbines, which could also lead to tariffs.

The EU’s new investigations do not automatically indicate its desire to start a trade war with China. Brussels is taking logical measures within the framework of fierce competition in industry and the green economy sector, says Sergei Lukonin, head of the Chinese economics and politics sector at the Center for Asia-Pacific Studies at IMEMO RAS. On the other hand, Beijing’s attempts to remove the EU from American influence have not been successful, he adds. Most likely, China hoped to at least avoid a new round of aggravation with the EU as a result of lengthy negotiations with its officials, adds Lukonin. The blow to steel exports could be very sensitive for the PRC: despite the desire of its authorities to build an economy based on domestic demand and high technology, for now, stable open markets for the PRC are simply necessary.