The recent steel trade protection proposal launched by the European Commission has sparked intense controversy within the industry. On October 7 local time, the European Union announced plans to significantly reduce duty-free steel import quotas and impose high tariffs. The next day, the European Automobile Manufacturers’ Association (ACEA) immediately expressed opposition, warning that this move would push up terminal prices and intensify inflationary pressure, highlighting the imbalance of interests in the EU’s industrial policy.
Quota Halved, 50% Tariff: EU’s Steel Trade Curbs
The EU’s proposal targets steel import controls with three core measures: cutting duty-free quotas by 47% from 2024 levels to 18.3 million tons annually, doubling tariffs on imports exceeding quotas from 25% to 50%, and tightening origin-tracing rules to crack down on “import fraud.”
This permanent policy has secured backing from 11 countries, including France, but requires approval from the European Parliament and a majority of member states to take effect. The European Commission cited the need to counter “the impact of low-cost Asian steel,” noting that EU crude steel output is projected to fall 6% year-on-year in 2024 while imports rise 12%—with Asian supplies accounting for over 60% of the market. It added that 320,000 direct jobs in the EU steel sector are at risk. The proposal also scraps the “quota carry-over mechanism” (which allowed member states to use unused quotas from others), closing loopholes to further limit imports.
Steel Stocks Up, Auto Sector Worried
Market reactions to the policy have been deeply polarized. European steel stocks surged collectively: ArcelorMittal’s share price rose over 6%, while SSAB and Outokumpu saw gains of more than 8%. Analysts expect industry profits to climb 25% to 30% if the measures pass.
By contrast, downstream manufacturing has been hit hard. The Euro Stoxx Auto Index dropped 1.7%, with BMW’s stock plunging over 8% in a single day; Volkswagen and Mercedes-Benz also fell more than 1%. Sigrid de Vries, ACEA’s Director General, emphasized that while 90% of steel used by automakers comes from within the EU, specialized grades still need to be imported to meet production needs. “The new policy will send import costs soaring,” she warned. Data shows that every €100-per-ton increase in steel prices adds roughly €110 to the cost of manufacturing one vehicle—translating to an estimated €7 billion in additional costs for Europe’s auto industry by 2026 if the policy is implemented.
Inflation Risks & Trade Balance Pressures
Eurozone consumer price index (CPI) hit 2.2% in September, marginally above the European Central Bank’s 2% target. Institutional forecasts suggest that enforcing the 50% tariff could push core inflation up by a further 0.2 to 0.3 percentage points in 2026, disrupting the ECB’s monetary policy normalization efforts.
A more profound risk lies in potential trade ripple effects. China, a major steel exporter to the EU, has filled the market gap left by Russia in recent years; the policy would directly hit China’s EU-bound steel shipments, raising the prospect of retaliatory measures under World Trade Organization (WTO) rules. Manufacturing-heavy countries like Germany have voiced concerns that higher costs will erode the auto industry’s global competitiveness, undoing advantages gained from recent U.S. tariff relief.
The EU is currently pushing for “quota exemption” clauses for key industries. This standoff over steel trade tests the bloc’s ability to balance industrial protection with inflation control—with its outcome set to shape the recovery of European manufacturing and reshape global trade dynamics.
