The United Kingdom trade deal with the United States may mark the beginning of the erosion of Section 232 import tariffs and US steel prices.
US President Donald Trump and British Prime Minister Sir Keir Starmer unveiled a trade deal that would lift 25% tariffs on UK steel during a press conference yesterday (May 8). It would also reduce the tariff rate on British-made cars from 25% to 10% per 100,000 units per year, after which a tariff of 27.5% would be applied. Rolls-Royce jet engines will also be exempt from duties.
President Trump said that, in turn, the UK would cancel its duties on American beef, ethanol, sports equipment and other goods, and would also buy $10 billion worth of Boeing aircraft as part of the agreement.
It took more than 50 days since President Trump imposed 25% import duties on steel, aluminum, and automobiles before a deal was announced between the United States and one of its closest allies. However, the details of the US-UK trade agreement, which remains the subject of further negotiations, are limited.
Which reduces the efficiency of section 232’
However, Laura Hodges, a member of the European Parliament and an international analyst of the US steel market, said the deal could mark the beginning of a series of trade agreements that would reduce the impact of tariffs on US steel prices.
"The effectiveness of Section 232 steel tariffs is being reduced again due to the trade agreement with the UK," Hodges said.
"It is reported that the UK and the US will now have a 0% tariff on bilateral steel trade. This is the beginning of the benefits that led to a reduction in Section 232 tariffs in 2018/2019."
She added: "Steel prices in the United States are significantly higher than in the rest of the world, and they are currently raised only because of tariffs. If tariffs decrease, our prices will decrease in the near future.
"We already expected lower prices this summer due to lower-than-expected demand from manufacturing and construction in the United States. Although more detailed information is required, the new deal poses a risk of lowering our short-term price forecasts."
The prices of hot-rolled coils in the United States from MEPS increased by almost 40% in the first quarter. Domestic producers have raised steel prices amid expectations of a reduction in supplies. Importers, meanwhile, have accelerated purchases in an effort to circumvent the new import duties.
In a recent episode of the "Market in Minutes" podcast dedicated to the United States, Hodges said that steel import prices in the United States have not decreased since the reintroduction of 25% tariffs under Section 232. Importers
