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Following the United States, the European Union (EU) has announced plans to significantly raise barriers on steel imports, citing the need to protect its domestic industry.

With duty-free benefits for imported steel set to be drastically reduced and tariffs hiked to 50%—matching the U.S. level—South Korean steel exports are expected to take a direct hit.

The European Commission, the EU's executive branch, officially unveiled the draft regulation containing protection measures for the European steel industry on the 7th (local time).

According to the draft, the annual duty-free quota for all imported steel products will be capped at a maximum of 18.3 million tons.

A senior Commission official explained that this figure is based on steel import volumes from 2013, a time before global oversupply became a full-scale issue.

This represents a reduction of approximately 47% compared to last year's import quota of 30.53 million tons. In particular, as the total volume is reduced, significant cuts to country-specific import quotas, including for South Korea, appear inevitable.

The tariff rate applied to imports exceeding the quota will also be increased from the current 25% to 50%.

These measures will apply to all third countries, excluding European Economic Area (EEA) members Norway, Iceland, and Liechtenstein. Specific import quotas for each country will be determined through future individual trade negotiations.

The Commission stated, "It is realistically impossible to exclude countries with FTAs from these measures," explaining that "FTA partner countries account for two-thirds of EU steel imports, and some of them contribute to the global oversupply." This implies that while negotiations will take place, total exemptions are off the table.

This initiative is intended to replace the existing steel safeguard measures.

The current safeguards, which the EU has implemented since 2018 in response to the first Trump administration's steel tariffs, allow for duty-free imports up to country-specific quotas, with a 25% tariff applied to any excess.

Under World Trade Organization (WTO) rules, these safeguards must be "forcibly terminated" by the end of June next year.

However, the Commission argues that trade restrictions are still necessary to protect the European steel industry.

The implementation of these measures is expected to deal a direct blow to South Korean steel. The EU is currently one of the largest export markets for South Korean steel.

According to the Korea International Trade Association (KITA), South Korea's steel exports to the EU last year (based on MTI 61) totaled $4.48 billion (approximately 6.28 trillion KRW), which was slightly higher than exports to the U.S. ($4.347 billion), the largest single-country export market.

Unlike the U.S., which imposes a 50% tariff on all items, the EU maintains a quota system, which provides some nuance. However, a significant reduction in the import quota will inevitably increase the burden on South Korean companies.

As recently as April, the EU reduced certain steel safeguard volumes, which already resulted in a cut of up to 14% to the South Korean quota.

Observers point out that urgent countermeasures are needed, such as establishing thorough strategies for import quota negotiations in advance.

Maroš Šefčovič, the EU Commissioner for Trade and Economic Security, also responded to a question at a press conference regarding the allocation of country-specific quotas, stating, "Import quotas may vary by country, and that depends on the outcome of negotiations (with the target countries)."

The implementation timeline remains flexible. For the regulation to take effect, it must undergo legislative procedures, including negotiations between the European Parliament and the Council representing the 27 EU member states.

"As soon as it is officially adopted, it will replace the safeguards," a Commission official said, adding, "The sooner, the better."

This suggests that if the legislative process is completed before the current safeguards expire at the end of next June, they intend to implement the new measures early.

The Commission's new plan is also intended to serve as leverage for trade negotiations regarding U.S. steel tariffs.

Currently, the EU is also subject to the 50% tariff imposed by the U.S. on steel exports; however, a joint statement from the EU-U.S. trade agreement explicitly mentions the possibility of introducing a "Tariff-Rate Quota (TRQ) solution," unlike other nations.

Consequently, the EU is raising its tariffs to 50% to align with the U.S. stance, while simultaneously demanding a reduction in tariffs for European steel in subsequent negotiations, citing the need for a coordinated response to oversupply.

A senior Commission official stated in response to a related question, "If the new regulation is implemented, it could serve as a strong basis for negotiations with the U.S. in terms of protecting the steel industry."

Yonhap News