LONDON — Britain’s steel industry is having a tough time. Thanks to the EU, it’s about to get even tougher.

As 2025 comes to a close, a combination of new tariffs from Washington and Brussels has left the sector teetering on the edge. And now it’s going to be smacked by Brussels’ new carbon import taxes.

The maelstrom could leave the industry “irreversibly and profoundly harmed,” according to its representative body.

The EU’s catchily-named Carbon Border Adjustment Mechanism (CBAM) goes live from the start of 2026. It will charge importers for the carbon price of their goods and introduce reams of new paperwork.

In the long run, British businesses will be exempt from the levy, thanks to Prime Minister Keir Starmer’s EU reset. In May, Brussels and London agreed to link their carbon emissions trading systems, bringing the U.K. into the exclusive club of “third countries” that won’t have to pay.

But those negotiations will take time, and until they are complete British steelmakers will face higher costs selling into the EU — by far their biggest overseas market.

On Wednesday the two capitals issued a joint statement pledging to complete talks by sometime in 2026, in time for an as-yet-to-be-scheduled summit. For U.K. steel, it’ll feel like a long wait.

“The EU CBAM creates barriers to U.K. steel exports to Europe and piles additional costs and admin onto our steelmakers at a time when global trade is increasingly turbulent,” Frank Aaskov, UK Steel’s director for energy and climate change policy, told POLITICO.

The ripple effects of the EU’s new policy are also expected to lead to steel from abroad being diverted to the less protectionist U.K., providing further competition on the domestic market for beleaguered producers.

“Our U.K. steel industry is largely unprotected as the EU CBAM risks redirecting steel flows away from Europe and into open markets like ours,” Aaskov added. He argued this was arguably “worse” than the CBAM charges themselves.

The industry body is urging the U.K. government to get a move on linking its carbon market with the EU to secure an exemption. It also wants ministers to develop the U.K.’s own version of CBAM, something promised for 2027.

Aaskov called for “urgent” steel import quota measures to stop the influx of diverted foreign products, without which “the U.K. steel industry is likely to be irreversibly and profoundly harmed.”

Bridging the gap

British exporters across carbon-intensive industries, including steel along with heavy manufacturing like concrete and chemicals, were hoping for a “bridging” deal that would shield U.K. businesses from CBAM levies while ETS linkage was being negotiated. None materialized.

Instead, the EU agreed a blanket exemption for electricity imports from neighboring countries and a slate of other category exemptions, such as for small and medium-sized businesses.

It’s an approach the U.K. — with its highly interlinked, cross-channel electricity market — will do well out of at the macro level. But it leaves steel exposed, at least temporarily.

“We’re not exempting anyone,” European Commissioner for Climate Wopke Hoekstra told a press conference Wednesday.  “But the moment we will be fully linking those [carbon markets], it is likely that there will be an exemption.”

Hoekstra added that “the price that [the U.K.] will be paying is actually minimal” and that that was “just one of the realities of how the system works.” While the scheme technically starts from Jan. 1, declarations of the carbon embedded in imports — and the associated fees — won’t be due until September 2027.

Adam Berman, director of policy and advocacy at trade body Energy UK, told a briefing of journalists ahead of the announcement: “I understand the position of the European Commission, which is that they will inevitably be concerned that any exemption that they might offer on an ad hoc basis to a country like the U.K. would then lead to countries like China and India — which are the main targets of the CBAM — turning around and saying: ‘Why don’t you give us equal treatment?’”

One EU official, granted anonymity to speak candidly, told POLITICO: “The companies, or the sectors that are actually concerned when it comes to the U.K., are very limited. So there will be an impact, but it will be very, very limited. And it will be also limited in time, because once the ETS agreement is in place it won’t be a question anymore.”

A U.K. government official said: “ETS linkage will remove CBAM. In the interim, we’ve always told businesses they need to prepare for January.”

The carbon levy is just the latest challenge for the industry, which sells 78 percent of its exported steel to the EU — totalling 1.9 million tons in 2024.

Back in March, it was slapped with 25 percent tariffs by Donald Trump’s protectionist U.S. administration. Despite Starmer supposedly securing a widely-trumpeted exception back in May, those tariffs still remain in place.

Then in October, British steelmakers learned they would be in the firing line from Brussels, too.

The EU plans, which were in part a blanket response to Trump’s tariffs, as well as Chinese dumping, will cut its steel import quotas in half. The industry said it was “the biggest crisis the U.K. steel industry has ever faced.”

In an interview with POLITICO on Monday, the EU’s trade chief Maroš Šefčovič said the U.K. and EU were “close allies” and “definitely on the first list of the countries with whom to start to talk” about the coming tariffs.

Where those talks might lead, he didn’t say.

Additional reporting from Brussels by Camille Gijs and Antonia Zimmerman