In yet more bad news for the UK’s beleaguered steel industry, the European Union has announced that it is imposing a 50% tariff on all steel imports into the bloc. This is in response to a glut of Chinese steel entering global markets, as their supply chains reorient away from the United States in the wake of Donald Trump’s own tariffs.

This was not what the British steel industry had been hoping for. UK steel production has declined from an output of just shy of 14 million tons in 2006 down to around 4 million tons in 2024. In the decade prior to 2006, output had declined by less than a million tons.

But since the passage of the Climate Change and Sustainable Energy Act that year, a noxious mixture of rising energy costs, regulatory unpredictability and supply-chain risk has caused multiple industrial sectors to disappear almost entirely from the UK — and with them, the British steel industry’s domestic mass market. Figures released last week indicate that the UK is still stuck with the highest commercial energy prices in the developed world.

The fact that the EU is considering a blanket tariff on all steel imports from anywhere in the world, rather than just on China, is evidence of the Europeans’ urgent desire to stay in Beijing’s good books. At a practical level, it also stems from the fact that it’s extremely hard to prove whether or not steel coming from elsewhere in the world is Chinese, given the prevalence of falsified or missing origin certificates. Yet it’s this latter point that might offer British steel suppliers a chance of respite.

In several critical industries, such as defense and aerospace, certificate-of-origin requirements are extremely robust, and Chinese steel is strictly prohibited from key categories of end product. This means that steel from top-tier nations with strict compliance rules is considered a premium product, as it reduces risk for quality managers and auditors.  The UK is therefore an important supplier to leading European aerospace and defense contractors for that reason, and those companies will be lobbying their home governments and in Brussels to ensure they do not lose access to the UK steel at a reasonable price.

But a glut of Chinese steel on global markets means that major European producers — especially in Germany and Italy, which retain large steel firms — will be looking to grab as much domestic market share as possible. The issue is particularly acute given the contraction of the European car manufacturing sector; and this, more than anything else, will be driving the pressure in Brussels for tariffs.

The UK has increased its total imports of steel from the EU in recent years, especially since the closure of the plant at Port Talbot a year ago. This means there is scope for substantial import substitution, whereby British firms would use domestic steel rather than importing and exporting. But this would result in the UK reciprocating the EU’s tariffs. Both World Trade Organization rules and the Trade and Cooperation Agreement signed with the EU in 2020 mean that these would need to be applied generally to all steel imports rather than specifically to those coming from Europe. This would extend to the US, which would not go down at all well with Trump.

An alternative would be for the Government to try to secure some kind of a concession from the EU to exempt British steel imports from the tariffs. This would almost certainly be met by a demand from Brussels that the UK make a concession in return, in the form of “alignment” with EU rules. There is a sense in Brussels that Keir Starmer is keen to do this kind of deal anyway, and that many of his supporters approve of the UK making concessions to the EU as a matter of principle. Steel tariffs offer as good an opportunity as any.

---

Chris Bayliss is an independent consultant who works on energy infrastructure in the Middle East.

baylissbaghdad

---