A new and confusing term is at the center of the latest transatlantic trade dispute: “derivative.” The United States’ decision to apply steel tariffs to a vast list of “derivative” products has left European industries scrambling to understand the rules of a game where the goalposts are constantly moving.
So, what is a derivative in this context? It’s not the raw steel or aluminum itself, but a finished product that contains those metals. In August, the US classified 407 product categories this way, capturing an enormous range of goods from industrial-scale wind turbines and bulldozers to everyday items like stainless steel sinks and furniture. This dramatically expanded the scope of the original tariffs.
The core of the dilemma for businesses is the ambiguity. There is no clear, limiting principle for what can be declared a derivative. As industry leader Luisa Santos warned, “It could be a motorbike that is now hit, or a table with a small bit of metal on it.” This lack of a clear definition creates a climate of fear, as almost any manufacturer using metal could be next.
The real-world consequences of this ambiguity are severe. German MEP Bernd Lange recounted the story of a motorcycle factory unable to provide a perfect audit of its metal content. Fearing a 200% penalty for an error, the company simply overpays its tariffs, a costly solution to an impossible compliance problem.
As the US considers adding even more products to this list, the “derivative” dilemma is set to worsen. For European manufacturers, it represents a fundamental challenge to the principles of clear and predictable trade, prompting urgent calls for a strong and unified response from EU policymakers.