U.S. Considers Steel, Aluminum Tariffs From High Carbon-Emitting Countries

According to Reuters, the Biden administration is set to propose new import tariffs on steel and aluminum based on how much carbon the producing country’s industries emit.

MSCI has not taken a position on this proposal — Connecting the Dots is reporting on this matter for its members’ information only.

The proposal would be negotiated with the European Union and is aimed at penalizing non-market economies like China. While the United States has not formally introduced this proposal, according to the draft obtained by Reuters, market-oriented countries would form a sort of “club” that would set emissions intensity standards for the production of specific steel and aluminum and products.

The club would exclude China and other non-market economies and would set out criteria to “prohibit member countries from contributing to the problem of unviable excess steel and aluminum capacity.” Countries that are members of the global arrangement that produced emissions that exceed the standards would pay higher tariffs when exporting metals to countries with lower emissions. Countries with steel and aluminum plant emissions at or below those of the importing country would pay no carbon-based tariffs.

According to an unnamed source, “There would be an advantage of being in the club” since those in it “would provide a lower level of carbon tariffs, while countries outside the club would pay higher tariffs” for violating emissions standards.

The source also confirmed the proposal is still very much in the “conceptual” stage. Reuters also reported the “hurdles to the plan are significant” since “the Biden administration’s legal authority for putting carbon-based tariffs in place is far from clear.”

How would the proposal affect North American metals producers? According to Reuters, U.S. steelmakers have the world’s lowest carbon emissions levels because 70 percent of American steel is made from scrap iron in electric-arc furnaces. European steelmakers rely more heavily on coal so the proposal would be advantageous to U.S. producers.