The European Union will ask the United States to establish a "steel union" of higher tariffs and tighter import restrictions — which could have knock-on effects in Australia's steel sector — at crucial talks in Brussels on Monday.
The move is designed to offset high US steel tariffs imposed on countries, including those in the EU and Australia.
But it is just one of several issues causing trade tensions between the US and EU after the Trump administration subjected a range of iconic European products to high tariffs announced in February.
These products include a range of items close to European hearts, including pasta and cheese.
EU trade commissioner Maroš Šefcovic said in an interview with the ABC that encouraging the US to adopt the steel measures already announced by the EU would jointly lead to a reduction in global over-capacity in the sector.
The talks come as European and US officials are also engaged in tense discussions over the future of Ukraine and, even on this issue, trade is raising its head.
EU wants to spend 'in a smart way' on military hardware
Mr Šefcovic confirmed a European move to preference military hardware purchases from EU members over others in the interests of self-reliance.
It would have notable knock-on effects on US military sales in the long-term at a time when Europe is undertaking a rapid rearmament, and repurposing of its manufacturing sector to weaponry.
"The decision taken at NATO that we have to increase our military spending to 5 per cent [of GDP at] the level of member states means that we want not only to spend more but in a smart way," Mr Šefcovic told the ABC.
"If you look at our combined military budgets, it's a huge volume of money.
"But we are not always getting the best value for this procurement," he added.
EU countries have historically all had their own national-based defence industries.
Western Europe, for example, produced no fewer than 17 different types of tank.
Spurred on by the perceived growing threat from Russia and conflict in Ukraine, NATO leaders have committed to a number of plans for joint investment and procurement in military hardware.
That includes what is known as the SAFE program (Security Program for Europe), which provides 150 billion euros ($267 billion) of long-term loans to member states to boost their defence capabilities, particularly for urgent spending.
It is based on the idea of common procurement in which member states will partner with other members, as well as Ukraine, on nominated projects.
The scheme allows the EU "just to organise ourselves better", Mr Šefcovic said.
"And to get the armaments we need, and of course to also put the military industry on the new stronger basis so we can rely on the power of the European industry to produce the arms we need in this volatile period. "
The shifts in defence procurement form a backdrop to high-level talks involving Mr Šefcovic and other EU trade ministers, who are due to meet with US Secretary Howard Lutnick and trade representative Jamieson Greer in Brussels on Monday, local time.
Europe's new steel 'safeguard' system
On steel, the EU recently adopted a new "safeguard" system, to come into effect in June next year.
This includes reducing the duty-free steel import quota by nearly half and doubling the tariff on imports that exceed the new quota to 50 per cent.
The action aims to protect the EU's domestic steel producers from unfair competition.
"We just adopted our safeguard measures [a] couple of weeks ago because I think, in a very similar way as the United States, we are really suffering because of the over capacities flooding our market," Mr Šefcovic said.
He said that he hoped this would pave the way on "how to address this very high US tariffs on steel and steel derivatives from the EU".
"We are not each other's problem because we are exporting something like 4 million tonnes of highly specialised steel, which is needed in the US for the military industry, for the aerospace industry because it's a one-of-a-kind type of steel," he said.
"And exports from the US to Europe are even lower. So we are not, kind of, threatening each other's steel production, but we have the same challenge that we are flooded by global overcapacity."
However, the new EU measures — like the steel tariffs imposed by the United States — will hit other countries, particularly the United Kingdom, which sells about 80 per cent of its steel exports to the EU.
Australia does not sell a lot of steel to Europe so export volumes are not expected to necessarily be hit hard.
But exporters will have to adjust to the demands for rules on tracking and tracing steel sales and carbon emissions, which are part of the regime.
Why 27 trade ministers will be discussing tariffs
The US also imposed a range of tariffs on about 400 European goods that were not included in the deal struck by Mr Trump and EU President Ursula von der Leyen in Scotland.
Mr Šefcovic expressed particular concerns about "some agricultural products, like wines and spirits, which have traditionally been trading with the US at zero tariffs".
"And now we have this 10 to 15 per cent all-inclusive," he added.
The list of agricultural products includes cheese, wines and spirits, olive oil and pasta, which is at the centre of an anti-dumping case.
To avoid the US doing deals with individual countries within the European trade bloc and weakening the bloc's position, the meeting will be attended by trade ministers from all 27 member countries.
"I'm very glad that for the first time there will be the opportunity that it would be not only my American counterparts and myself," Mr Šefcovic said.
"But also we will be joined by 27 trade ministers from all EU member states, which I hope will open new opportunities to exchange and all these difficult things on our agenda."
The trade differences also cover medical devices, fashion items and high-tech manufacturing equipment.
The talks come amid more turmoil in US trade policy with Mr Trump recently announcing the dropping of tariffs on goods that were causing big price hikes in the weekly shopping baskets of American families.
The US is Europe's biggest trading partner and, as a result, any fluctuation in the trade had an immediate impact on the companies that were involved in trade with the US, and therefore on the US economy, Mr Šefcovic said.
