The European Commission’s new trade safeguard measure is intended to protect Europe’s steel industry, but it could also increase the cost of transformers and investment in electricity networks. Could its impact ultimately be felt by electricity consumers?
What does the new safeguard duty mean?
On 18 September 2026, the European Commission introduced a provisional safeguard measure on imports into the European Union of certain products made of electrical steel, through Implementing Regulation (EU) 2026/2133. The Regulation entered into force on 25 September 2026.
The measure is intended to protect the relevant EU industry against serious injury caused, or threatened to be caused, by increased imports from third countries.
The safeguard measure concerns grain-oriented electrical steel (GOES), which is used primarily in the manufacture of power and distribution transformer cores. The Regulation also covers transformer laminations and cores, including cores already incorporated into finished transformers.
For the latter, the Regulation provides for a provisional safeguard duty of EUR 1,140 per tonne.
At first glance, this may appear to be a trade safeguard measure affecting only the steel industry. Its potential impact, however, extends considerably further, as transformers are an integral part of electricity transmission and distribution networks.
A provisional measure – but for how long?
The safeguard duty introduced by the European Commission is provisional at this stage. Under the Regulation, the safeguard measure remains in force for 155 calendar days, until 26 February 2027.
This does not, however, necessarily mean that the safeguard measure will come to a definitive end on that date.
The European Commission is continuing its investigation into the relevant market and the impact of imports, and may, on the basis of its findings, propose replacing the provisional measure with a longer-term safeguard measure. Such a decision would require the necessary support of the EU Member States.
Two outcomes are therefore possible: the provisional safeguard duty may expire as scheduled, or it may be replaced by a longer-term safeguard measure. In the latter case, both the conditions governing the measure and the applicable duty rates may change.
This creates a degree of uncertainty in the European electrical equipment market. Transformers may take anything from several months to several years to manufacture and deliver, meaning that manufacturers, importers and network operators must make long-term purchasing and investment decisions before future import conditions have been finally determined.
The issue is therefore not merely the level of the provisional safeguard duty, but also how competitive conditions in the EU electrical equipment market will develop after February 2027.
How might the safeguard duty affect transformer prices?
One of the most important components of a transformer is its magnetic core, which is manufactured using specialised electrical steel. The properties of this material directly affect the transformer’s energy losses and operating efficiency.
Where a safeguard duty applies to the core of a transformer imported into the European Union, the cost of importing it increases. The amount of duty depends on the weight of the core.
For example, the safeguard duty on a transformer core weighing two tonnes is EUR 2,280. In the case of heavier transformers, the additional duty burden may be considerably greater.
This does not automatically mean that the selling price of every imported transformer will rise by precisely the amount of the duty. The actual effect depends on the contractual terms agreed between the manufacturer, importer and purchaser, the competitive environment and the extent to which additional costs can be reflected in the selling price.
In the longer term, the safeguard duty may also affect the general price level in the EU electrical equipment market, as higher prices for imported equipment may reduce price competition.
Will more expensive transformers also mean more expensive electricity?
The construction, upgrading and maintenance of electricity networks require continuous investment. The purchase of transformers accounts for a significant share of that investment, whether it involves building a new substation, modernising an existing network or providing additional network capacity.
An increase in transformer acquisition costs may therefore raise network operators’ investment costs.
The potential impact can be illustrated by the following sequence:
Safeguard duty → higher transformer acquisition costs → increased investment costs for electricity networks → potential upward pressure on network charges → potentially higher costs for end consumers of electricity.
It is important to distinguish between the market price of electricity and network charges. The safeguard duty does not directly increase the cost of generating electricity, but it may make the infrastructure required to transmit and distribute electricity more expensive and thereby affect the price of network services.
Network charges depend, among other things, on regulated pricing arrangements and on which investment costs are permitted to be taken into account when setting those charges. It would therefore be incorrect to assert that the safeguard duty will inevitably lead to higher electricity bills.
Equally, such an effect cannot be ruled out.
Recitals 79 and 80 of the European Commission’s Regulation also address the possibility that the safeguard measure could increase transformer costs, slow the development of electricity networks and affect electricity prices. Nevertheless, the European Commission considered the impact of higher transformer prices on network costs and, consequently, electricity prices to be negligible.
This assessment raises the question of whether sufficient account has been taken of the potential long-term and cumulative impact of the safeguard duty on investment in electricity networks.
The question is particularly relevant at a time when the European Union is seeking simultaneously to accelerate electrification, increase the share of renewable energy and modernise ageing electricity infrastructure.
Duties on transformer cores manufactured from EU steel
One of the most important issues concerning the scope of the Regulation relates to international production and supply chains.
Transformers are not always manufactured in a single country. Electrical steel may be produced in the European Union, subsequently exported to a third country for the manufacture of transformer cores, and the finished cores then supplied to another country for the manufacture of transformers.
If a finished transformer is subsequently imported into the European Union, the question arises as to how the origin of the core incorporated in it should be determined and under what conditions the safeguard duty applies to that core.
For example, the production chain may be as follows:
- Electrical steel is produced in the European Union.
- The steel is exported to a third country, where it is cut and assembled into transformer cores.
- The finished cores are supplied to another country for the manufacture of transformers.
- The finished transformers are imported into the European Union.
In this situation, the raw material used to manufacture the transformer core originates in the European Union, but the core itself is manufactured outside the European Union.
For the purposes of applying the safeguard duty, should such a core be treated as a product originating in a third country?
The answer depends on the EU rules on non-preferential origin. Under Article 60(2) of the Union Customs Code, the determination of the origin of goods produced in more than one country takes account, among other things, of the last substantial, economically justified processing or working.
The original provenance of the raw material therefore does not automatically determine the origin of the finished product manufactured from it.
The key legal question is whether cutting electrical steel and assembling it into a transformer core constitute processing or working that changes the non-preferential origin of the goods.
The steel’s chemical composition and essential properties may remain unchanged during that manufacturing process. The mere fact that the material’s properties are preserved does not, however, necessarily mean that the customs origin of the goods remains unchanged.
A situation of this kind has already arisen in Estonian practice: transformer cores manufactured in third countries from electrical steel produced in the European Union have been subject to a safeguard duty upon importation into the European Union, even though the steel used to manufacture the cores originated in the EU.
Could the safeguard measure also affect European producers?
The purpose of the safeguard duty is to protect EU producers from the potential adverse effects of increased imports. In the context of international supply chains, however, the measure’s impact may not be confined to producers in third countries.
Where electrical steel produced in the European Union is used to manufacture transformer cores outside the EU, the imposition of duties on those cores may also affect the competitiveness of European steel producers.
For example, manufacturers of transformer cores in third countries may begin to favour raw materials originating elsewhere if using EU-origin steel provides no customs advantage when the finished product is imported.
In such circumstances, the safeguard measure could, under certain conditions, also reduce demand for steel produced in the European Union.
This is, however, a potential economic consequence, the actual extent of which depends on manufacturers’ purchasing decisions, the availability of alternative materials and international price competition.
This raises a broader question: could a measure introduced to protect one industry simultaneously harm that industry’s export opportunities or increase costs for other European businesses?
Seven days to adapt to the new conditions
In addition to its economic impact, the timetable for the safeguard measure’s entry into force deserves attention.
The European Commission’s Implementing Regulation was published on 18 September 2026 and entered into force as early as 25 September. Businesses therefore had only seven calendar days between its publication and entry into force.
The manufacture and delivery of transformers often involve long lead times. Orders for larger items of electrical equipment may be placed six months to two years before the planned delivery date.
By the time the safeguard duty entered into force, binding supply contracts may therefore already have been concluded, prices fixed, manufacturing commenced or goods dispatched.
The Regulation does not provide for any general transitional arrangements for contracts concluded before its entry into force or for goods already in transit.
This may result in unforeseen additional costs for businesses. Where the contract price has been fixed and cannot be amended, the additional duty burden may fall on the importer.
The foreseeability of the scope of the safeguard measure also warrants separate consideration.
The European Commission initiated the relevant investigation on 27 March 2026. The notice of initiation covered flat-rolled products of electrical steel, as well as transformer laminations and cores, but did not separately identify cores already incorporated into finished transformers.
Their express inclusion within the scope of the safeguard measure only became apparent from the Regulation published in September.
Although the initiation of the investigation alerted market participants to the possibility of trade safeguard measures, it remains open to question whether businesses could have foreseen the precise scope of the measure and the associated costs.
This directly concerns legal certainty and the predictability of the business environment.
Balancing the protection of producers with the interests of consumers
The European Union is entitled to adopt trade safeguard measures to protect its industries against the harmful effects of international trade.
However, an assessment of such measures cannot be confined solely to the interests of the industry being protected.
Electrical steel is not an ordinary finished consumer product, but an important input in the manufacture of electrical equipment, indirectly affecting the cost of the infrastructure needed to transmit and distribute electricity.
It is therefore necessary to consider the entire value chain, from steel producers and transformer manufacturers to network operators and end consumers of electricity.
The potential effects discussed above give rise to three interrelated questions:
- Will the safeguard measure achieve its objective without disproportionately harming other EU industries?
- Is it justified in every case to impose duties on products manufactured in third countries from raw materials originating in the European Union?
- Has the potential impact of the safeguard duty on investment costs for electricity networks and on consumers’ network charges been assessed in sufficient depth?
These questions are relevant to both EU industrial policy and the energy sector.
Conclusion
The European Commission’s new safeguard duty illustrates how closely industrial policy, trade rules and the energy sector are interconnected in today’s international economy.
A measure introduced to protect one industry may affect other businesses’ production costs, international supply chains and the investment required to develop electricity networks.
Although the European Commission assessed the impact of the safeguard measure on electricity prices as negligible, its potential long-term consequences merit further consideration. This is particularly so because, when the provisional measure expires in February 2027, it may be replaced by a longer-term safeguard measure.
Protecting European industry is an important objective. Equally important, however, is ensuring that the costs of achieving it are not passed on disproportionately to other European businesses and, ultimately, electricity consumers.
The actual outcome of the safeguard measure will depend on how it affects producers’ competitiveness, transformer pricing and investment in electricity networks over the coming years.
Source: Commission Implementing Regulation (EU) 2026/2133 of 18 September 2026; Regulation (EU) No 952/2013 of the European Parliament and of the Council (Union Customs Code), Article 60.
