EU's New Trade Defense Mechanism: Strengthening Steel Imports and Exports Control
In March 2025, the European Commission proposed a new rule of origin for steel products to enhance the effectiveness of its trade defense measures. The new policy is part of the Steel and Metals Action Plan, which aims to address the rising concerns over the potential circumvention of anti-dumping duties and other trade restrictions by third-country steel producers.
Under the new rule, the origin of steel products (such as melted and poured steel) will be determined by where the metal was initially smelted, rather than the location where it was further processed. This change is expected to prevent steel products, especially from countries like China, from entering the EU market through processing in other countries, thus circumventing anti-dumping and other trade defense measures.
The new rules will have significant implications for imports of cold-rolled and hot-dip galvanized steel into the EU, particularly products that were smelted in China and later processed in other nations such as Vietnam. This measure aims to stop Chinese steel products from being mislabeled as originating from another country, a practice that has raised concerns over market fairness and competition.
Tackling Global Overcapacity and Protecting EU Markets
A key aspect of this reform is the EU's vigilance against excess steel production capacity in non-market conditions. Overcapacity, particularly in countries like China, often results in a dumping of low-priced steel products into the EU market, threatening the economic viability of local manufacturers. By enforcing this stricter rule of origin, the European Commission intends to safeguard its domestic steel industry from unfair competition caused by this excess capacity.
This new trade defense tool aligns with broader European efforts to reduce the negative impacts of steel dumping, particularly in the context of geopolitical tensions and trade imbalances. The Commission's approach includes proactive trade investigations, allowing authorities to act before any harm actually occurs, addressing potential risks of market distortion before they can escalate.
The Role of Scrap Exports and Tariff Quotas
In addition to the origin rule, the European Commission is also considering export restrictions on scrap metal and the introduction of tariff quotas on steel imports. This could involve setting export duties of up to 25% on scrap metal, aimed at ensuring sufficient domestic supply for the European steel industry. Such measures would bolster the EU’s strategic autonomy in steel production by controlling the flow of essential raw materials.
Moreover, the tariff quota system proposed by the European Commission is expected to limit the amount of certain steel products that can be imported into the EU under preferential rates, thus stabilizing market conditions for local producers. This measure aims to ensure fair trade and prevent market flooding by non-EU steel producers.
Impact on Chinese and Vietnamese Steel Exports
China has been a major point of focus in the EU's trade defense measures. Currently, steel products smelted in China can be processed in third countries, like Vietnam, and then exported to the EU without being labeled as Chinese steel. This loophole has allowed cheap Chinese steel to undercut European prices and harm the local industry.
The new rule of origin will address this by ensuring that steel products originating from China (even if processed elsewhere) will now be classified as Chinese imports. This change is expected to have a significant impact on Vietnamese steel exports, which often contain Chinese-origin products. According to industry analysts, this could reduce the flow of galvanized steel and other products from Vietnam into the EU, as they are often produced using Chinese raw materials.
Future Steps and Industry Reaction
As the European Commission prepares to implement these changes, there are ongoing discussions about the effectiveness of such measures in combatting unfair trade practices. Andriy Glushchenko, an analyst from the GMK Center, highlighted that while the new rules aim to target Chinese steel exports, verification mechanisms will play a crucial role in determining the success of the policy. Effective checks and enforcement will be critical in ensuring that trade circumvention does not continue through loopholes.
Furthermore, the European steel industry is likely to see significant changes in the coming years as the Commission implements these trade defense mechanisms alongside broader efforts to foster decarbonization and innovation within the sector. The Clean Industry Agreement introduced by the European Commission in February 2025 also positions green steel production as a key priority for the EU, suggesting that trade policy changes will coincide with environmental goals in the coming years.
Key Takeaways:
• The European Commission has proposed a new rule of origin for steel products to strengthen trade defense measures and prevent circumvention of anti-dumping duties.
• The origin of steel products will now be determined by where the metal is smelted, not where it is processed, targeting countries like China and Vietnam.
• The new rule will affect imports of cold-rolled and hot-dip galvanized steel, which are often processed in third countries like Vietnam but originally smelted in China.
• The Commission plans to open proactive trade investigations to address the threat of damage before it occurs, protecting EU steel producers from unfair competition.
• The EU is considering export duties of up to 25% on scrap exports, which could help ensure sufficient domestic supply for European steel manufacturers.
• Tariff quotas on steel products will be introduced to limit imports, stabilizing the European steel market and ensuring fair trade practices.
• These measures are expected to target overcapacity in non-market economies like China and reduce the impact of cheap steel imports on the EU market.
