The European Commission is imposing definitive tariffs on imports of steel products, in a bid to protect European steelmakers getting caught up in the trade war between the US and China.

The US steel tariffs against China close off the US market for Chinese exporters, which then have to sell their products somewhere else. Given the steel plants are already there as sunk costs, in the short to medium run Chinese producers will only consider their variable costs when setting their price. Given the drop in demand from the US, prices will drop. In Europe this price setting will be perceived as dumping, hurting European steel producers.

Therefore, the policy response of the EU makes sense. In the long run, the US and China are expected to resolve their dispute. When the trade war is over, Europe is probably better off with some steel industry of its own. This could be for a myriad of reasons, like shorter supply chains for other industries within Europe. There are concerns though about competitiveness of domestic producers when the market opens up again. European steel producers should not be overprotected by these EU tariffs.