The link between CBAM and upcoming EU steel tariffs

The EU CBAM is designed to level the competitive playing field between imported and domestically produced carbon-intensive products. While EU-based producers partially offset their carbon emissions by purchasing carbon certificates in the EU Emissions Trading System (ETS), non-EU based producers do notⁱ. This discrepancy might lead companies to manufacture carbon-intensive products outside the EU and then import them. Companies may therefore consider producing carbon-intensive products outside the EU and then import these products into the EU. CBAM attempts to reduce this form of carbon leakage by essentially charging the carbon price of the ETS on imports.

CBAM entered into a transitional period in October 2023 – during this period companies were required to submit quarterly reports but not yet to purchase CBAM certificates. This changed with the start of the definitive period in January 2026 – since then only authorised companies can import CBAM-products. In addition, companies are required to partially offset the emissions embedded in their imports by purchasing CBAM certificates (which are priced based on the ETS price).

To calculate these embedded emissions, companies can choose to either use actual data or default values. The latter are published by the European Commission and specific to each Combined Nomenclature (CN) product code and country of origin. In contrast to actual emissions, embedded emissions based on default values do not have to be verified by accredited third-party verifiers. However, default values do include a mark-up that increases over time, making them potentially less favourable than actual emissions as they result in a larger number of CBAM certificates to be purchased.

Currently, CBAM applies to around 600 products of aluminium, cement, electricity, fertilisers, iron and steel, and hydrogen. For 2028, an expansion to around 200 additional downstream products such as machinery and vehicle parts is plannedⁱⁱ.

As we explored in a previous article and illustrate in Figure 1, many iron and steel products that fall under CBAM also fall under the proposed EU steel overcapacity regulation. All products that fall under the latter, also fall under the former.ⁱⁱⁱ

Figure 1: Steel products that fall under CBAM and the proposed EU steel overcapacity regulation

Note: Authors’ calculation and visualisation based on European Commission (2025)^iv. The numbers indicate the products at the CN8-level.

The EU steel overcapacity regulation was proposed by the European Commission in October 2025 to replace the current EU steel safeguard measures which have been in place for eight years but cannot be extended^v. In April 2026, the European Council and the European Parliament reached a provisional agreement on this regulation “aimed at addressing the negative trade-related effects of global overcapacity on the EU steel market.”^vi In a nutshell, the proposed regulation plans to reduce the overall volume of steel “tariff-rate quotas” (TRQs, measured in metric tonnes) by about 50% compared to 2024 and double the out-of-quota duty from 25% to 50%. Put simply, tariffs will become applicable earlier and be higher.

Taking a closer look at country-specific and product-specific steel quotas

At the time of writing, the previously mentioned provisional agreement of the European Council and the European Parliament and/or data on the future TRQs are not publicly available. To provide some insights, however, we have taken a closer look at the TRQs for the time period between 1 April 2025 until 30 June 2026^vii. For this time period, the EU defines TRQs for 18 countries as well as for all “Other countries” grouped together. Figure 2 shows the aggregated TRQs for the 18 countries. It is important to stress that the future TRQs are currently being negotiated and that future TRQs might differ from past and current TRQs.

Figure 2: Volume of tariff-rate quotas by country (April 2025 – June 2026)

Note: Authors calculation and visualisation based on European Commission (2024)^viii.

The TRQs are organised into 30 product categories that cover 248 products at the CN8-digit level. As illustrated in Figure 3, not all countries have TRQs for all product categories. Malaysia, for example, only has a specific TRQ for stainless cold rolled sheets and stripes (product category 9). In comparison to other countries and product categories, Turkey’s TRQ for non-alloy and other alloy hot rolled sheets and stripes (product category 1) stands out.

Figure 3: Volume of tariff-rate quotas by country and product category (April 2025 – June 2026)

Note: Authors calculation and visualisation based on European Commission (2024)^ix. Numbers show thousand net tonnes. Darker colours indicate larger numbers.

Now that we have a better understanding of the current country-specific TRQs, we link this information to CBAM to explore the potentially accumulating impact for EU-based steel importers. To do so, we first link the TRQs for each of the 30 product categories to the previously mentioned CBAM default values via the shared CN product codes^x. In a second step, we calculate the average CBAM default value for each of the 30 product categories and the 17 countries^xi.

Figure 4 visualises this data and highlights a selection of examples. TUR (1), for instance, shows that product category 1 (non-alloy and other alloy hot rolled sheets and strips) from Turkey have a high TRQ and a relatively low average default value. EU-based companies that import these products from Turkey might not be in a bad position: First, the high TRQ means that tariffs will only become applicable relatively late. Second, the default values seem to be relatively low compared to other countries, making it potentially less attractive to invest in collecting and calculating actual emissions data.

The situation might be different for EU-based companies that import stainless wire rod (product category 15) from Taiwan. Here, the TRQ is relatively low and tariffs will enter into force relatively quickly. In addition, the default values are comparatively high. In other words, these companies are more likely to be double-impacted by tariffs and higher CBAM costs due to the high default values.

Figure 4: Volume of tariff-rate quotas and average CBAM default value by country and product category (April 2025 – June 2026)

Note: Authors calculation and visualisation based on European Commission (2024)^xii and European Commission (2025)^xiii.

Switzerland is exempted from CBAM because the EU ETS and the Swiss ETS have been linked since 2020^xiv. As a result, EU-based companies that import CBAM-products with a Swiss origin do not have to be comply with CBAM. However, at the time of writing, Switzerland is not exempted from the EU steel overcapacity regulation^xv. 

Figure 5 shows that the six product category-specific TRQs for Switzerland have been relatively stable since April 2025 and that non-alloy and other alloy wire rod (product category 16) presents the highest TRQ.

Figure 5: Volume of tariff-rate quotas for selected product categories for Switzerland (April 2025 – June 2026)

Note: Authors calculation and visualisation based on European Commission (2024)^xvi.

Let's take a closer look at these product categories. Figure 6 illustrates the specific products that belong to each category. In total, the TRQs apply to 77 products at the CN8-level – almost half of these fall under stainless steel bars, rods, angles and shapes (CN4 code 7222) and tubes, pipes, and hollow profiles of iron/steel (CN4 code 7306). Swiss exporters of stainless bars and light sections might be particularly impacted since the TRQ is low and applicable to a relatively high number of products at the CN8-level.

Figure 6: Products included in the product category-specific volume of tariff-rate quotas for Switzerland (April 2025 – June 2026)

Note: Authors calculation and visualisation based on European Commission (2024)^xvii. The very left number refers to the product category. Right next to it, the product at the CN4-level is shown. The bars indicate the number of CN8-level products.

In this article, we show that the EU CBAM and the proposed EU steel overcapacity regulation apply to similar steel products and that therefore some EU-based companies might be double impacted. The extend to which this is the case, however, depends on the specific product and its country of origin. 

For affected companies it is urgent and important to incorporate both, CBAM-related costs and potential steel tariff-related costs, into their strategic supply chain planning. Indeed, the costs of CBAM certificates are already applicable to imports of the calendar year 2026 – even if the CBAM certificates can only be purchased retrospectively starting in February 2027. As outlined above, the point at which additional tariffs may become applicable depends on the specific product being imported as well as on the country of origin. Most importantly, companies therefore need to assess what exactly they import from where.

Once the potential financial exposure is clearer, companies should prioritise the decarbonisation of their supply chain to reduce costs. Here, a clear transition plan is crucial—incorporating carbon accounting, scenario analysis, and collaboration across suppliers to effectively manage regulatory costs and emissions. To facilitate this transition towards decarbonised supply chains, companies may benefit from support mechanisms such as the EU Decarbonisation Fund, the EU Innovation Fund, and/or national subsidies that help finance investments in low-carbon technologies and energy-efficient processes.

Finally, companies should keep the regulatory context and other upcoming regulations in mind that focus on the steel sector: the EU’s Ecodesign for Sustainable Products Regulation (ESPR) and the associated Digital Product Passport (DPP)^xviii as well as the EU’s Industrial Accelerator Act (IAA)^xix both identify steel as a priority – we will provide further insights on this in upcoming articles. 

Until then, please do reach out to us to explore:

• CBAM and tariff compliance and governance.

• Financial modelling and hedging strategies related to CBAM. 

• Restructuring supply chains and supporting incentives for emission reduction technologies.