Steel industry in UK warns of ‘biggest crisis’ ever as EU hikes tariffs

The European Union’s decision to hike steel tariffs and sharply cut import quotas has provoked widespread concern in the U.K., as well as rumblings of discontent among carmakers on the continent.

The bloc announced plans on Tuesday to reduce tariff-free quotas on imported steel — proposing a reduction of 47% compared to 2024 steel quotas — and to hike tariffs from 25% to 50% on any excess imports.

The European Commission said the measures were a response to calls from workers, industry and several member states “to offer strong and permanent protection to the EU steel industry, with a view to safeguarding EU jobs, and supporting the sector in its decarbonisation efforts.” The proposal will replace the steel safeguard measure, which is set to expire by June 2026.

The tariff hike provoked an immediate outcry in the U.K., with the country’s beleaguered steel industry already suffering a number of body blows, including steelworks closures leading to thousands of job losses, and U.S. tariffs of 25% on steel exports to the States.

“This is perhaps the biggest crisis the U.K. steel industry has ever faced,” Gareth Stace, director general of industry body UK Steel, said Tuesday.

“Government must go all out to leverage our trading relationship with the European Union to secure U.K. country quotas or potentially face disaster,” he added.

Emily Sawicz, director and Industrials senior analyst at RSM UK, told CNBC that the EU’s announcement was a “significant threat” to the U.K.’s steel industry.

“The EU accounts for around 80% of U.K. steel exports, so 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,” she told CNBC’s “Europe Early Edition” on Wednesday.

The bloc’s move follows similar tariffs on foreign steel imposed by the U.S. and Canada in a bid to stem cheaper imports — largely from China — which they say are damaging their domestic steel industries.

U.S. President Donald Trump raised the tariff on the majority of steel and aluminum imports from 25% to 50% this year, while Canada tightened import limits and introduced a surtax of 25% on any steel imports that were originally melted and poured in China.

China rejects accusations that it has dumped excess cheap steel onto the global market.

The EU on Tuesday noted that “steel overcapacity is a global problem that requires strong, genuine and joint action by all partners.”

Tariffs have been promoted as a way to protect national steel industries, but sectors reliant on the commodity — most notably, the auto industry — have baulked at quotas and tariffs.

The U.K. is likely to seek an exemption from the EU, and may take heart from the fact that Norway, Iceland and Liechtenstein won’t be subject to the EU’s steel tariff quotas or duties as they are in the European Economic Area (EEA).

The Commission also signalled a willingness to exempt Ukraine from the duties, noting, “interests of a candidate country facing an exceptional and immediate security situation, such as Ukraine, should also be reflected upon when deciding on the quota allocations, without undermining the effectiveness of the measure.”

The U.K. is not in the EEA, but is a close trading partner and ally of the EU. Prime Minister Keir Starmer said, after news of the tariff hike broke, that the government was holding discussions with both the EU and U.S. about steel tariffs.

Retaliatory measures might not be off the table, with British Industry Minister Chris McDonald noting: “We continue to explore stronger trade measures to protect U.K. steel producers from unfair behaviors.”

He added, however, that “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.

The EU’s announcement has not been well received in all corners of the continent, with the European Automobile Manufacturers’ Association (ACEA) saying the measures could threaten the domestic car industry.

The auto body noted that European carmakers source around 90% of their direct steel purchases in the EU and that they are “most concerned” about the inflationary impact the restrictions will have on European market prices.

“The dramatic lowering of quotas and the doubling of the out-of-quota tariff to 50%, will significantly reduce the possibility to relieve pressure in the European market through imports,” the ACEA said in a press release.

In addition, it said a new rule of origin based on the “melt and pour” principle will further restrict imports and “create a massive administrative burden for European users of imported steel products.”

ACEA Director General Sigrid de Vries said the body recognized the need for some level of protection for the steel sector, but added, “we feel that the parameters as proposed by the Commission go too far in ring-fencing the European market. We need to find a better balance between the needs of European producers and users of steel in this measure.”