While some trading partners have accepted their country-specific measures, China has said the measures are protectionist, raising questions about the EU's strategy for countering global overcapacity.
The EU's new country-specific steel import quotas and tariffs regime designed to help shield European producers from excess foreign output could be vulnerable to challenge at the World Trade Organization or within bilateral trade agreements, experts say.
While some trading partners have accepted the measures that took effect on July 1, China has said they are protectionist, raising questions about the outlook for the EU's strategy for countering persistent global steel overcapacity and whether the commission’s calculations comply with international rules.
The new EU rules have capped the volume of steel that can enter the bloc duty-free at 18.3 million metric tons per year, equivalent to about two thirds of the 27.4 million metric tons of finished steel that was imported in 2024. Half of this capped volume has been reserved for countries with a free trade agreement with the EU, while the remainder is available to any trading partner.
Under the rules, overall duty-free steel import quotas have been cut by 47 percent and the tariff on imports exceeding those quotas doubles to 50 percent.
The allocations vary significantly by trading partner. The UK, received a quota of about 154,000 metric tons for hot-rolled sheets and strips and 175,000 metric tons for wire rod, while the US was allocated 509 metric tons in one hot-rolled sheet category and otherwise relies on residual quotas available to non-FTA suppliers.
Countries that the EU doesn't have a trade agreement with, such as China, face cuts of around two-thirds: China's tariff-free allocation has dropped to 800,000 tons from 2.4 million tons.
“There is scope to argue that they [quotas] are not fully WTO-consistent and there are grounds for a successful WTO challenge," Joanna Redelbach, of law firm Van Bael & Bellis, told MLex.
China said in May that the EU's steel measures were “protectionism" that could disrupt China-EU steel trade and global supply chains. Its Ministry of Commerce warned that China would take corresponding measures to defend its legitimate rights and interests if the EU discriminated against Chinese companies or products.
The commission has said its methodology complies with WTO rules and stressed that the measures are aimed at addressing global steel overcapacity rather than targeting China.
The steel measures come amid growing determination among EU policymakers to protect European producers from low-priced, subsidized imports, particularly from China, after years of dialogue failed to curb global overcapacity. They reflect a broader shift toward more assertive use of trade-defense tools, even where that risks testing the limits of the bloc’s WTO and bilateral commitments.
— FTA preference —
The more immediate legal risk for the EU may come from countries whose free trade agreements with the bloc promise zero duties on steel.
Unlike the US and Canada, the EU didn’t invoke national security to impose tariffs but instead used Article 28 of the WTO’s General Agreement on Tariffs and Trade to renegotiate its tariffs and allocate quotas based on historical trade volumes, lawyers have said.
However, EU trade agreements don’t contain an equivalent to Article 28, said Joost Pauwelyn, professor at the Geneva Graduate Institute and partner at Cassidy Levy Kent.
Some FTAs allow bilateral safeguards, but these are temporary and often permit duties only up to the most-favored-nation rate. Because that rate was previously zero for steel, those provisions may give the EU little scope to impose additional duties, he said.
The commission has offered FTA partners preferential quotas and asked them to accept the new system. Some countries have agreed, but others continue to negotiate, leaving open the option for litigation under either WTO or FTA dispute-settlement rules.
“The question there is whether any of the EU partners has an appetite for initiating a dispute against the EU,” Redelbach said.
– Agreements –
Thirteen countries – Argentina, Brazil, Egypt, India, Indonesia, North Macedonia, the Republic of Korea, Singapore, South Africa, Switzerland, Turkey, the UK and Ukraine – have informally agreed on their quota allocation for EU steel imports at lower tariff rates.
The EU executive remains committed to formalizing the preliminary agreements with trading partners, a commission spokesperson told MLex. Talks will also continue with countries that haven’t accepted their quota allocations, with the aim of reaching further agreements in the coming months, she added.
Although Ukraine has given its preliminary backing to the new EU regime, the significant cut in its quota has triggered some concerns over the impact on the country's steel industry and questions about the commission’s calculations.
Luca Zanotti, the CEO of Interpipe, a Ukrainian manufacturer and exporter of pipe and railway products, said in a statement that the steel quotas were “a severe blow to the industry.”
He urged the commission to correct what he said is an error in the calculation of the seamless pipe quota, which the company said was around 30 percent lower than it should be based on Eurostat data.
The commission said it is “carefully looking into the matter together with Eurostat.”
Whether a country challenges the EU's new steel trade measures at the WTO or within an FTA remains to be seen. But while negotiations continue with some trading partners, the commission's methodology and wider strategy for tackling global overcapacity is likely to remain under close scrutiny.