The European Union and the United States will increase efforts to deconflict their trade and climate policies ahead of U.S. presidential and EU parliamentary elections next year, but lingering disagreements will lead only to a suspension rather than the lifting of Trump-era tariffs on EU steel and aluminum. Brussels and Washington are reportedly nearing an interim agreement covering parts of the broader Global Arrangement on Sustainable Steel and Aluminum (GSA), a sectoral arrangement that the two have been negotiating since 2021 as a way to soothe bilateral trade tensions and pause Trump-era tariffs on imports of steel and aluminum from Europe. If implemented, the interim agreement would see the European Union and the United States introduce new tariffs that would target excess steel production from countries that benefit from non-market practices, like China. However, the deal will not address other outstanding issues toward establishing the broader GSA framework, particularly concerning levies on carbon-intensive imports, regarding which the two sides' negotiating positions remain far apart. 

• Citing risks to national security, the Trump Administration imposed tariffs on steel and aluminum imports in 2018 under section 232 of the Trade Expansion Act from all trade partners, including the European Union. In retaliation, the European Union introduced tariffs targeting politically sensitive U.S. products such as bourbon whiskey and Harley-Davidson motorcycles.
• In 2021, a preliminary deal on the GSA paused tariffs between Washington and Brussels, setting an October 2023 deadline for finding a binding agreement and a solution to the dispute. If not achieved, U.S. section 232 tariffs (which are now replaced by a tariff-rate quota that still limits EU exports to the United States) and EU retaliatory measures are set to automatically come back into force unless the two sides further extend the deadline.
• GSA negotiations aim to resolve U.S.-EU bilateral disputes over steel and aluminum tariffs; tackle global overcapacity, which implicitly refers to China's excess steel production; accelerate the decarbonization of the steel and aluminum sectors; and finally, create an inclusive arrangement that would be open to third countries meeting the criteria of market openness and carbon-reduction policies.

The negotiations are part of a broader push in the United States and the European Union to reduce disputes between their respective trade and environmental policies. While the Biden Administration has largely kept Trump-era tariffs in place, Transatlantic relations have improved significantly since President Biden took office in 2021, as the creation of the EU-U.S. Trade and Technology Council (TTC) in the same year has demonstrated. Still, despite a shared interest in tackling climate change and spearheading the global energy transition, landmark climate initiatives on both sides of the Atlantic are proving a significant point of friction in EU-U.S. relations. This is particularly the case when translating measures mutually perceived as protectionist, such as the European Union's Carbon Border Adjustment Mechanism (CBAM) and the United State's Inflation Reduction Act (IRA), into tangible trade and industrial policies. Yet the two sides are increasing efforts to avoid carbon tariffs and green industrial subsidies from leading to a trade war, which both are keen to avoid. GSA negotiations, as well as ongoing parallel talks that are intended to lead to an agreement on critical raw materials, are key elements of this broader effort to reconcile EU and U.S. climate and trade policies. 

• A comprehensive deal in which the European Union and the United States would grant each other carve-outs in CBAM and the IRA, respectively, is unlikely — particularly because such a move would breach WTO (World Trade Organization) rules. It would also contradict Brussels' justification for CBAM as a non-discriminatory climate-focused initiative. Nevertheless, the two sides are working on parallel sector-specific deals to reduce the two measures' impacts on one another. While the GSA would partly address trade barriers for carbon-intensive steel arising from the European Union's CBAM, Brussels and Washington are also negotiating a critical minerals agreement that would allow EU mining and chemical companies exporting to U.S. battery manufacturers to benefit from electric vehicle tax credits under the IRA.
• The EU-U.S. TTC was established in June 2021 as a forum for transatlantic coordination on key global trade, economic and technology issues with a goal of deepening bilateral trade and economic ties. On top of regular TTC ministerial meetings, EU Trade Commissioner Valdis Dombrovskis and U.S. Trade Representative Katherine Tai have met regularly over the past year to accelerate efforts in overcoming lingering trade disputes.

Reaching a comprehensive agreement by the Oct. 31 deadline remains challenging amid persisting fundamental disagreements, but a shared interest in maintaining positive momentum in bilateral trade relations means the two sides will likely decide to extend the deadline. The reported interim agreement on new tariffs aimed at fighting steel overproduction in China, a priority of the Biden Administration, confirms a mutual interest in Washington and Brussels to improve EU-U.S. relations amid shared geopolitical concerns and economic interests. However, while this represents a step forward in broader GSA negotiations, the two sides remain far apart on key aspects of a comprehensive and legally binding framework to restrict carbon-intensive steel and aluminum imports. On the one hand, the European Union insists the GSA will need to be compatible with WTO rules and implemented alongside its own domestic policy for carbon taxation — CBAM. On the other hand, the United States is pushing for joint tariffs that would supersede CBAM for steel and aluminum trade on a bilateral basis. In fact, a carbon levy at the border similar to the European Union's CBAM would require the United States to implement a domestic carbon price, a politically unfeasible option in its current political landscape. This means a comprehensive GSA agreement by the Oct. 31 deadline appears unlikely, but as neither Brussels nor Washington wants a return of Trump-era steel tariffs, the most likely scenario is for the two sides to postpone the deadline and reach a high-level political agreement over the coming months to be implemented at a later stage. Brussels and Washington will push to reach such a deal before the U.S. presidential and EU parliamentary elections in 2024, after which a potentially more protectionist EU Parliament and Commission and a possible second Trump Presidency could further complicate cooperation. Still, even if a deal is reached prior to the two elections, an eventual second Trump administration would most likely walk away from the deal and reimpose tariffs, meaning that the risk of a Transatlantic trade war would persist. 

• The GSA would establish a common framework to measure carbon emissions associated with steel and aluminum production and restrict imports of products that exceed a given carbon content threshold by imposing a corresponding levy. Brussels already has a similar tool in place — the CBAM — which levies an import duty on goods destined for the EU market manufactured in countries with less stringent climate legislation. 
• The United States is currently conducting a study into the level of emissions associated with its steel and aluminum sectors, while the European Union is investigating which third-country carbon pricing systems could be considered equivalent to its Emission Trading System (ETS), on which CBAM is based. These parallel efforts have the potential to eventually bring about greater harmonization in the measures adopted by the two markets under the Global Sustainability Alliance (GSA), though neither will likely be completed by the Oct. 31 deadline. In this sense, a further extension of the negotiation and tariff-free period would acquire even greater significance. 
• An eventual second Trump Administration would also complicate plans for the raw materials agreement between Brussels and Washington. If re-elected, Trump would be unlikely to respect the deal, and the latter would likely be challenged and defeated in court.