EU Launches Probe into Aluminium Imports Amid U.S. Tariffs

The European Union has taken decisive steps to safeguard its struggling metals industry from the impact of U.S. tariffs imposed by the Trump administration. The EU is launching a formal investigation into the aluminium market to address a sudden surge in cheap imports, primarily from the UAE, India, and Russia. This surge is expected to accelerate due to the recent 25% tariffs imposed by the U.S. on aluminium imports, which have redirected excess global supply towards Europe. The probe will assess whether this influx of cheap imports is harming EU producers and will target all trading partners except Norway and Iceland, which are part of the EU’s economic area.

The EU's move comes as its aluminium and steel industries face significant challenges. European aluminium producers have been struggling for over a decade, losing market share to cheaper imports. The post-COVID decline in production, exacerbated by high energy costs and weak demand, has further weakened the industry. The U.S. tariffs have added another layer of uncertainty, posing a serious threat to domestic metal producers.

In response, the EU is considering a range of trade defense measures. These include introducing steel-like import quotas and imposing 25% tariffs on aluminium exceeding those limits. The EU also plans to block companies from bypassing tariffs by processing aluminium in third countries through the “melted and poured” rule. Additionally, a proposal to impose reciprocal restrictions on countries that limit scrap metal exports to the EU is under consideration.

The EU's actions are part of a broader strategy to protect its industries from global trade shifts. By tightening steel import quotas by 15% from April, the EU aims to combat the influx of cheap steel diverted from the U.S. market. This move is expected to reduce inflows by a further 15% and is part of a broader effort to level the playing field in the global metals market.

The EU's stance is not without risks. The move could provoke countermeasures from affected countries, leading to further trade disruptions. Countries facing EU restrictions may redirect their aluminium to other markets, creating a fragmented global pricing structure. The effectiveness of these measures depends on broader demand trends in construction and automotive sectors, which remain uncertain.

Protecting European metal industries is not just about tariffs; it is about long-term sustainability. The EU's Carbon Border Adjustment Mechanism will soon impose levies on high-carbon imports, ensuring European producers are not undercut by companies with looser environmental regulations. However, the cost of decarbonizing the aluminium and steel sectors is estimated to be significant, with many companies arguing that investment in cleaner production technology is currently not economically viable. EU policymakers are exploring subsidies and tax reductions to offset these costs, but implementation remains uncertain.

The EU's aggressive stance could help its aluminium and steel sectors survive a turbulent period, but deeper issues remain. If energy costs remain high, European producers may struggle to regain their competitiveness. Retaliatory trade actions could disrupt global supply chains, leading to unexpected consequences. The EU must strike a balance between protectionism and its free-trade commitments as it navigates this new era of strategic competition in the global metals market.