Under a series of voluntary export agreements with major producers, the same result would be achieved, in terms of US steel imports, but it is foreign producers that would gain the extra revenue. In other words, US consumers of steel would effectively subsidize foreign steel producers.
The Trump administration is amenable to this outcome, because it finds it inconvenient to put a tariff on imports from its allies. From the US perspective, the allies should simply tax their exports and keep the revenues.
Unlike the US – which has apparently abandoned economic logic in its search for quick “wins” on trade – the EU is a slow-moving entity that generally prioritizes economic logic above geopolitical considerations and favors long-term agreements. Given these differences, it may be difficult to come to an agreement in the next 30 days.
Still, for the EU, the economic logic of agreeing to Trump’s demands appears strong enough to convince it to hand Trump this apparent victory. The gain to European steel producers should more than cover the cost of lawyers’ fees to defend voluntary export restraints at the WTO.
Daniel Gros is director of the Brussels-based Center for European Policy Studies. He has worked for the International Monetary Fund, and served as an economic advisor to the European Commission, the European Parliament and the French prime minister and finance minister. He is the editor of Economie Internationale and International Finance.