EU auto industry rocked as bloc plans to cut steel import quotas, double tariffs

European auto stocks plunged sharply today after the European Commission shared its sweeping plan to tighten steel trade rules on Tuesday.

The Commission had said that it would slash tariff-free quotas by almost half and lift duties to 50% on excess imports. The announcement, described as “strong and permanent protection” for the steel industry, knocked carmakers across the region.

By press time, the Stoxx Automobiles and Parts index had fallen 1.7%, the steepest drop among European sectors, according to data from CNBC.

The new quota will shrink duty-free steel imports to 18.3 million tons a year, a cut of 47% compared with 2024. Anything above 18.3 million will face the new 50% tariff, double the rate in place today. But the European Automobile Manufacturers’ Association (ACEA) said the Commission’s plan goes too far and will pile extra costs on the sector.

Car lobby warns of higher costs

ACEA’s director general Sigrid de Vries said European automakers already source about 90% of their steel inside the bloc and now fear a surge in market prices.

“We are most concerned about the inflationary impact that an effective continuation of the safeguard will have on European market prices,” Sigrid said. While she acknowledged that steel needs some protection, she argued the new framework “goes too far in ring-fencing the European market.”

Sigrid called instead for “a better balance” between producers and buyers.

The reaction was not limited to Brussels. The plan made a lot of people angry in the UK, where the steel sector has faced closures, layoffs, and a 25% tariff on exports to the U.S. Gareth Stace, head of UK Steel, said Tuesday, “This is perhaps the biggest crisis the U.K. steel industry has ever faced.” He urged London to fight for national quotas with the EU or risk “disaster.”

Emily Sawicz, senior analyst at RSM UK, said the EU decision is a “significant threat” to British mills. Speaking on CNBC, Emily pointed out that 80% of UK steel exports go to the EU.

“These tariffs risk cutting off access to the U.K.’s largest and most strategically important market at a time when the sector is already under immense pressure from global competition and rising energy costs,” said Emily.

Global rules widen trade fight

The European Commission defended its decision by saying it answered calls from workers, member states, and steel companies to protect jobs and back the industry’s decarbonization. The new system will replace the current safeguard set to expire in June 2026.

EU officials also argued that steel overcapacity “is a global problem that requires strong, genuine and joint action by all partners.”

The EU’s policy mirrors actions in the U.S. and Canada. President Donald Trump this year raised duties on most steel and aluminum imports to 50%, up from 25%. Canada imposed a 25% surtax on steel melted and poured in China while tightening import rules. Beijing rejected charges that it flooded markets with cheap exports.

The EU’s plan leaves some exceptions. Norway, Iceland, and Liechtenstein, as part of the European Economic Area, will not be covered. Brussels also signaled Ukraine may be exempt, citing its “exceptional and immediate security situation.”

The UK, not in the EEA, must negotiate. Prime Minister Keir Starmer said his government is holding talks with both Brussels and Washington on the tariff hike.

British Industry Minister Chris McDonald reportedly hinted at retaliation, telling CNBC that:-

“We continue to explore stronger trade measures to protect U.K. steel producers from unfair behaviors.”

But Chris also said, “It’s vital we protect trade flows between the U.K. and EU and we will work with our closest allies to address global challenges.”

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