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Trump to Slap Tariffs on Steel Imports, Trade War Fears Loom
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Steel stocks got a big thrust on Thursday after President Donald Trump said that the U.S. will impose heavy tariffs on steel and aluminum imports in a major move to protect the domestic producers of these metals, rebuild the long-struggling U.S. steel and aluminum industries and safeguard American jobs.
The President, in a meeting with executives of steel and aluminum companies at the White House, said that he would levy a 25% tariff on steel imports and 10% tariff on aluminum imports, with plans to formally announce them next week. The President noted that steel and aluminum companies have been “very unfairly treated by bad policy, by bad trade deals, by other countries” and the tariffs would remain for "a long period of time."
A Welcome News for U.S. Steel Makers
Positive reactions to Trump’s comments triggered a rally in major U.S. steel stocks on Thursday with U.S. Steel Corp. (X - Free Report) , AK Steel Holding Corp. , Nucor Corp. (NUE - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) gaining roughly 5.8%, 9.5%, 3.3% and 4%, respectively.
AK Steel, which racked up the biggest gain yesterday, lauded President Trump's announcement and said, in a statement, "We support and commend President Trump for announcing today the actions he plans to take to stem the tide of unfairly traded steel imports that threaten the national security of our country."
Both U.S. Steel and Steel Dynamics sport a Zacks Rank #1 (Strong Buy). While Nucor carries a Zacks Rank #2 (Buy), AK Steel currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Steel stocks also got a lift last month after the U.S. Department of Commerce (DOC) issued the long-awaited reports on its probe into imports of steel and aluminum products and recommended President Trump to impose tariffs or quotas on these imports.
The DOC’s investigations, which were carried out under Section 232 of the Trade Expansion Act of 1962, were aimed at determining whether the imports pose a threat to national security. The Trump administration ordered the investigation last year.
The DOC found that these imports “threaten to impair the national security” as defined by Section 232. The DOC Secretary Wilbur Ross recommended at least 24% and 7.7% global tariffs on all steel and aluminum imports, respectively, from all countries. Ross also proposed a number of alternative measures to address the problem of steel imports.
Domestic steel makers struggled to cope with a renewed tide of cheap steel imports last year. Imports of cheap steel continue to flood American shores despite a string of punitive trade actions (in the form of heavy tariffs) and threats of further future measures. These imports have hurt selling prices and margins of U.S. steel makers.
According to the American Iron and Steel Institute (AISI), an association of North American steel makers, total steel imports shot up 15.4% to around 38.1 million net tons in 2017. Finished steel imports for 2017 also increased 12.2% to around 29.6 million net tons, per the AISI. For full-year 2017, finished steel import market share was an estimated 27%, which is higher than 26% clocked in 2016.
As such, the proposed U.S. trade actions would give American steel makers more pricing power and also help to level the playing field.
But Trade War Fears Shake Markets
The tariff announcement stoked fears of an international trade war and sparked selloff on Wall Street yesterday with the Dow Jones Industrial Average falling 1.7% while the S&P 500 losing 1.3%.
Moreover, fears of higher steel prices hit the stocks of a host of industrial companies that are major consumers of the metal. Shares of Caterpillar Inc. (CAT - Free Report) lost 2.9% while The Boeing Company (BA - Free Report) was down 3.5%.
Major automobile stocks were also hit hard with shares of General Motors Company (GM - Free Report) and Ford Motor Company (F - Free Report) tanking 4% and 3%, respectively, on concerns about the higher costs they have to bear for the key raw material. This would eventually result in higher cost for consumers.
Risks of Retaliation Loom Large
The planned U.S. trade actions are likely to trigger retaliation measures from affected countries and major foreign trade partners, thereby hurting the U.S. economy. In fact, the announced actions have prompted fiery responses from major U.S. allies like the European Union and Canada.
The European Commission released a statement yesterday in response to the announcement by President Trump. Jean-Claude Juncker, President of the European Commission, said that “We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification.” Juncker added that “The Commission will bring forward in the next few days a proposal for WTO-compatible countermeasures against the US to rebalance the situation."
The Canadian trade minister Francois-Philippe Champagne said that “Any tariffs or any quotas that will be imposed on our aluminum industry, our steel industry, would be unacceptable” and also cautioned that the decision would “have an impact on both sides of the border.” Canada accounted for roughly 16% of total U.S. steel imports in 2017, per the U.S. Census Bureau data, making it the largest steel exporter to the United States.
Brazil, which is the second-largest exporter of steel to the United States with roughly 13% share of total imports last year, also expressed significant concerns about the U.S. trade action and has threatened to take actions to protect its interests.
Meanwhile, the South Korean trade ministry stated that it will keep talking to U.S. officials and policymakers “until the U.S. government makes a final decision.” South Korea is the third-largest steel exporter to the United States with roughly 10% share of total U.S. steel imports in 2017, according to the U.S. Census Bureau data.
Moreover, the Chinese commerce ministry, in a statement, said that "The Chinese side expresses grave concern." While China only accounts for 2% of U.S. steel imports, it is the world’s biggest producer of steel accounting for around half of the global production. Beijing had earlier threatened to take necessary actions should President Trump implements import tariffs.
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Trump to Slap Tariffs on Steel Imports, Trade War Fears Loom
Steel stocks got a big thrust on Thursday after President Donald Trump said that the U.S. will impose heavy tariffs on steel and aluminum imports in a major move to protect the domestic producers of these metals, rebuild the long-struggling U.S. steel and aluminum industries and safeguard American jobs.
The President, in a meeting with executives of steel and aluminum companies at the White House, said that he would levy a 25% tariff on steel imports and 10% tariff on aluminum imports, with plans to formally announce them next week. The President noted that steel and aluminum companies have been “very unfairly treated by bad policy, by bad trade deals, by other countries” and the tariffs would remain for "a long period of time."
A Welcome News for U.S. Steel Makers
Positive reactions to Trump’s comments triggered a rally in major U.S. steel stocks on Thursday with U.S. Steel Corp. (X - Free Report) , AK Steel Holding Corp. , Nucor Corp. (NUE - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) gaining roughly 5.8%, 9.5%, 3.3% and 4%, respectively.
AK Steel, which racked up the biggest gain yesterday, lauded President Trump's announcement and said, in a statement, "We support and commend President Trump for announcing today the actions he plans to take to stem the tide of unfairly traded steel imports that threaten the national security of our country."
Both U.S. Steel and Steel Dynamics sport a Zacks Rank #1 (Strong Buy). While Nucor carries a Zacks Rank #2 (Buy), AK Steel currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Steel stocks also got a lift last month after the U.S. Department of Commerce (DOC) issued the long-awaited reports on its probe into imports of steel and aluminum products and recommended President Trump to impose tariffs or quotas on these imports.
The DOC’s investigations, which were carried out under Section 232 of the Trade Expansion Act of 1962, were aimed at determining whether the imports pose a threat to national security. The Trump administration ordered the investigation last year.
The DOC found that these imports “threaten to impair the national security” as defined by Section 232. The DOC Secretary Wilbur Ross recommended at least 24% and 7.7% global tariffs on all steel and aluminum imports, respectively, from all countries. Ross also proposed a number of alternative measures to address the problem of steel imports.
Domestic steel makers struggled to cope with a renewed tide of cheap steel imports last year. Imports of cheap steel continue to flood American shores despite a string of punitive trade actions (in the form of heavy tariffs) and threats of further future measures. These imports have hurt selling prices and margins of U.S. steel makers.
According to the American Iron and Steel Institute (AISI), an association of North American steel makers, total steel imports shot up 15.4% to around 38.1 million net tons in 2017. Finished steel imports for 2017 also increased 12.2% to around 29.6 million net tons, per the AISI. For full-year 2017, finished steel import market share was an estimated 27%, which is higher than 26% clocked in 2016.
As such, the proposed U.S. trade actions would give American steel makers more pricing power and also help to level the playing field.
But Trade War Fears Shake Markets
The tariff announcement stoked fears of an international trade war and sparked selloff on Wall Street yesterday with the Dow Jones Industrial Average falling 1.7% while the S&P 500 losing 1.3%.
Moreover, fears of higher steel prices hit the stocks of a host of industrial companies that are major consumers of the metal. Shares of Caterpillar Inc. (CAT - Free Report) lost 2.9% while The Boeing Company (BA - Free Report) was down 3.5%.
Major automobile stocks were also hit hard with shares of General Motors Company (GM - Free Report) and Ford Motor Company (F - Free Report) tanking 4% and 3%, respectively, on concerns about the higher costs they have to bear for the key raw material. This would eventually result in higher cost for consumers.
Risks of Retaliation Loom Large
The planned U.S. trade actions are likely to trigger retaliation measures from affected countries and major foreign trade partners, thereby hurting the U.S. economy. In fact, the announced actions have prompted fiery responses from major U.S. allies like the European Union and Canada.
The European Commission released a statement yesterday in response to the announcement by President Trump. Jean-Claude Juncker, President of the European Commission, said that “We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification.” Juncker added that “The Commission will bring forward in the next few days a proposal for WTO-compatible countermeasures against the US to rebalance the situation."
The Canadian trade minister Francois-Philippe Champagne said that “Any tariffs or any quotas that will be imposed on our aluminum industry, our steel industry, would be unacceptable” and also cautioned that the decision would “have an impact on both sides of the border.” Canada accounted for roughly 16% of total U.S. steel imports in 2017, per the U.S. Census Bureau data, making it the largest steel exporter to the United States.
Brazil, which is the second-largest exporter of steel to the United States with roughly 13% share of total imports last year, also expressed significant concerns about the U.S. trade action and has threatened to take actions to protect its interests.
Meanwhile, the South Korean trade ministry stated that it will keep talking to U.S. officials and policymakers “until the U.S. government makes a final decision.” South Korea is the third-largest steel exporter to the United States with roughly 10% share of total U.S. steel imports in 2017, according to the U.S. Census Bureau data.
Moreover, the Chinese commerce ministry, in a statement, said that "The Chinese side expresses grave concern." While China only accounts for 2% of U.S. steel imports, it is the world’s biggest producer of steel accounting for around half of the global production. Beijing had earlier threatened to take necessary actions should President Trump implements import tariffs.
Don’t Even Think About Buying Bitcoin Until You Read This
The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.
Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 4 crypto-related stocks now >>