US and EU Agree To Suspend Trade War Until March 2025 Amidst Presidential Election Dynamics

In a diplomatic move with significant implications for global trade dynamics, the European Union and the United States have reached an agreement to temporarily suspend their trade war, deferring tariffs on steel and aluminium until the end of March 2025. Initially imposed by the Trump administration on national security grounds, these tariffs have been a source of tension between the two economic powerhouses.

The decision to pause the trade dispute is seen as a strategic move ahead of the upcoming presidential election in the United States, allowing President Joe Biden to maintain stability in relations with EU allies. While the deferment presents a diplomatic front, it also positions President Biden as resolute on trade issues for the domestic audience.

The US tariffs on steel and aluminium, instituted in 2018 during Donald Trump’s presidency, prompted retaliatory measures by the EU, affecting goods such as motorcycles and whisky. Under President Biden, the tariffs were paused, but not abolished, providing a basis for future negotiations.

Trade expert Brad Setser of the Council on Foreign Relations noted that the agreement to suspend the trade war is an “obvious deal” given the current global context, particularly with Ukrainian and Russian production largely removed from global markets. The pause in hostilities aims to prevent further escalation and find a sustainable solution to the ongoing trade dispute.

The World Trade Organisation (WTO) had previously ruled against the tariffs, declaring them in violation of global trade rules. The new agreement allows for a continuation of the suspension, with 3.2 million metric tons of EU-made steel to be imported tariff-free annually. However, the US imported 3.8 million tons in 2021, resulting in significant tariffs.

The bilateral trade negotiations between the US and EU also aim to address broader issues, including climate change concerns related to steel and aluminium production. Efforts to secure a global deal on these matters have been ongoing for over two years, but a comprehensive agreement is yet to be reached.

The lack of progress in international trade talks reflects broader challenges in reforming global trade rules, with the Biden administration expressing the need for changes in the WTO’s dispute resolution system without providing detailed plans. As expectations remain low for the upcoming WTO meeting in Abu Dhabi, the trade dynamics between the US and the EU will continue to shape the trajectory of international trade relations.

Kiki Garba

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