Germany has announced that it expects US tariffs on steel and aluminium to come into effect as of 1 May, when the temporary EU exemption expires. This will create the potential for trade tension between the EU and the US.
This announcement was made as Ms Merkel prepared to fly to the US for talks with President Donald Trump which is set to cover a number of contentious issues – among them the above-mentioned trade sanctions as well as the future of the Iran nuclear deal.
The EU did stress, however, that it is still in talks with the US over securing a permanent exemption. According to an EU official , Cecilia Malmstrom, EU trade commissioner, has been talking to Wilbur Ross, US commerce secretary, several times a week and it is still hoped an agreement can be reached.
Following President Trump’s announcement of the sanctions in March, aluminium prices have rapidly increased, raising concerns on the potential impact on everything from car production to the aerospace industry.
Furthermore, Mr Trump's particularly aggressive sanctions against Russian metals giant Rusal would prevent European companies from doing business with Russia. Given that Rusal supplies most of Europe’s leading aluminium producers from a giant plant in Ireland which is now under threat of closure, the impact could be disastrous.
Earlier this week, Washington gave US and non-US citizens an additional five months to wind up business with Rusal and softened earlier payment requirements. But this would only allow European companies to resume trading with Rusal until October, so a longer-term solution is clearly needed. The US has set out terms for Rusal being removed from its sanctions list, but this would involve Russian oligarch Oleg Deripaska relinquishing ownership of the company. It seems Europe will either need to reduce its dependency on Rusal or hope that an agreement between all parties can be achieved.