BRUSSELS — New curbs on European steel imports are barely in force, and yet they are already in trouble after Brazil denied having reached a deal with Brussels — contradicting the EU’s own claims.
The spat could be an early warning of wider diplomatic fallout after the European Union this week nearly halved the volumes countries can supply duty-free and doubled out-of-quota duties to 50 percent. The new steel protections — which follow a similar U.S. duty hike — are intended to shield local industry from a global supply glut.
China, the world’s largest steel producer, took a two-thirds haircut under the EU’s new allocations.
But Brussels has also inflicted pain on more than a dozen countries with which it has free-trade deals, saying they had accepted average steel quota reductions of a third. They include Brazil, the largest economy in the Latin American Mercosur bloc, where a broader trade accord only entered into force in May after years of negotiations.
Brazil denied the existence of any such steel understanding. “To date, there has been no agreement between Brazil and the EU regarding compensation,” its ministries of foreign affairs and trade said in a strongly-worded statement on Wednesday night.
In a comment after this article was published, the Commission said it had engaged constructively with Brazil over the past four months and negotiations would continue.
“Discussions to date have clearly demonstrated a shared commitment to finding a mutually acceptable solution,” a Commission spokesperson said. “We are working towards finalizing an agreement with a trusted partner like Brazil.”
Before Brazil spoke out, a senior EU official had said on Tuesday that the secretive quota negotiations held at World Trade Organization headquarters in Geneva had not been easy.
“We are serving a smaller pie and therefore, inevitably, the pieces that we’re cutting on both sides will be smaller for each country,” said the official, who briefed reporters on condition of anonymity.
Agreement in principle
The new protections seek to shelter the European steel industry from global overcapacity and ensure that there is a secure source of supply for downstream industries — such as the renewable energy and defense industries.
Because such restrictions are generally incompatible with free-trade agreements, the EU attempted to inflict less pain on countries that have free-trade deals with the EU.
The Commission said on Tuesday it had reached agreement in principle with Brazil and 12 other countries. Brazil, however, sees the new quota system as “a unilateral measure” and wants compensation for the expected loss in market share.
Brasília also stressed that it was not a cause of mostly Asia-based overproduction.
“Imposing trade restriction measures on countries that are not the cause of the problem does not contribute to finding an effective solution and may lead to an escalation of trade defense measures,” the government said in its statement.
Brazil’s steel exports to Europe have fluctuated in recent years, from 700,000 metric tons in 2022 to just 156,000 tons in 2024. The EU granted Brazil tariff-free quotas of around 227,000 tons, according to Tuesday’s numbers, though that excluded any residual quotas that it could compete for.
No-deal risks
The Commission said it had also reached agreements in principle with Turkey, India, Korea, Indonesia, Egypt, the U.K., Switzerland, North Macedonia, South Africa, Argentina, Ukraine and Singapore.
But, among major steel suppliers that have close trading relations with the EU, Japan and Vietnam were notably missing.
Governments that have a free-trade deal with Europe can sue Brussels bilaterally or at the WTO to force a solution.
A Japanese official told POLITICO during negotiations in May that Tokyo would “seriously consider” all options, both bilaterally and via the WTO.
“This is a zero-sum game. We should rather be working together on ringfencing our steel industries,” they added. The Japanese government declined further comment after the quotas were published.
Camille Gijs contributed reporting. This article has been updated.
Brazil backlash spells trouble for EU steel deals
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