The European Union has agreed to a partial truce with the U.S. in a dispute over metal tariffs imposed by former President Donald Trump and to start discussions on global overcapacity and what they called China's "trade-distorting" policies.

The European Commission, which oversees EU trade policy, said on Monday it would suspend a planned hike of retaliatory tariffs for up to six months. These would have added U.S. products from lipstick to sports shoes and doubled to 50 percent duties on U.S. bourbon whiskey, motorbikes and motorboats on June 1.

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In a joint statement, Brussels and Washington said that, as allies, they could promote high standards, address shared concerns "and hold countries like China that support trade-distorting policies to account." 

In April this year, amid accusations of overproduction, China started a nationwide investigation into the implementation of steel capacity cuts. The world's top steel producer, China started a campaign to eliminate outdated and excess capacity in the ferrous sector since 2016.

Last year, the imports of steel products rose 64 percent and billets surged by nearly 500 percent, but the country's steel output also hit record levels as industrial activity roared back to life following pandemic shutdowns.

"Since 2016 ... the reduction of steel capacity has achieved significant results, but some deep-rooted contradictions have not been solved fundamentally," the Chinese authorities wrote in a statement.

'Terrible optics' and Harley-Davidson bikes

The EU-U.S. discussions would seek solutions before the end of the year to global steel and aluminium overcapacity.

A month ahead of a visit to Brussels by U.S. President Joe Biden, one EU diplomat said it would have been "terrible optics" if the bloc had raised tariffs on Harley-Davidson bikes and products of other U.S. firms.

Bernd Lange, head of the trade committee of the European Parliament, said the U.S. needed to come to an EU-U.S. summit with a "tangible commitment to reciprocate the EU gesture. Otherwise, tariff hikes would be justified.

The U.S. will maintain its tariffs of 25 percent on steel and 10 percent on aluminium, which also apply to imports from China, India, Norway, Russia, Switzerland and Turkey.

The Trump administration cited U.S. national security grounds as the basis for its metals tariffs – measures that steelmakers such as Thyssenkrupp and Voestalpine have said affected them

The EU denied that its exports posed any security threat and responded by placing its tariffs on 2.8 billion euros ($3.4bn) of U.S. products, including motorbikes, whiskey and orange juice. These will also remain in place.

The EU had urged the U.S. to suspend the metals tariffs for six months, mirroring the four-month suspension the two sides agreed in March for their aircraft subsidy dispute.

The European Commission has said the U.S. tariffs affect 6.4 billion euros ($7.8bn) of EU metal exports and that it would "rebalance" the remaining 3.6 billion euros ($4.37 billion) after three years, or after a favorable ruling by the World Trade Organization (WTO).

Those three years were set to expire in June. Its challenge at the WTO is ongoing.