President Donald Trump is reportedly planning to impose tariffs on steel and aluminum imported from the European Union (EU), Canada and Mexico after failing to win concessions from his trade allies ahead of a Jun 1 deadline. An announcement is expected on Thursday, with the tariffs coming to effect as early as Friday. Understandably, the move could lead to retaliatory measures resulting in a global trade war.
Earlier this year, Trump had announced higher tariffs on steel and aluminum imported from China, signaling a potential trade war. However, despite criticism from different quarters, his decision was cheered by domestic steelmakers. On May 30, shares of domestic steel and aluminum makers once again rallied on expectations of the Trump administration moving ahead with import duties on steel and aluminum from EU, Canada and Mexico.
Tariffs on Imported Steel, Aluminum Raise Trade War Fears
Reportedly, the Trump administration is planning to impose tariffs on imported steel and aluminum from the EU, and possibly Canada and Mexico. The decision certainly hasn’t gone down well with the EU, Canada and Mexico, as they are U.S. trade allies.
The tariff threats came with the objective of compelling the trade allies of United States into agreeing to its concessions, including limitations on imports on aluminum and steel, which would help U.S. steelmakers and its workers.
It goes without saying that if the United States finally imposes import duty on steel and aluminum from the EU, Canada and Mexico, these countries would likely take retaliatory measures. This could lead to an even bigger global crisis.
Earlier this year, Trump had announced tariffs of 25% and 10% on imported steel and aluminum, respectively, from China. That said, he had exempted the EU, Canada and Mexico with offers of negotiations. However, negotiations could not be finally reached and the EU is finally bracing for tariffs, as the deadline ends today.
VIDEO Domestic Steel Stocks Rally Once Again
Trump’s announcement of imposing import duties on Chinese steel and aluminum in March drew enough flak. However, Trump’s decision was backed by his beliefs that such a move would help in rebuilding the U.S. steel and aluminum industry that had been treated unfairly by other countries for decades.
Post announcement, investors feared that other countries too might take similar steps, which will hurt the global economy and trade, eventually affecting profits of U.S. exporters. This saw shares of major U.S. steel exporters taking a hit.
Price Performance Since 12/29/17
However, Trump’s announcement was immediately cheered by domestic steelmakers, with their shares rallying. Markets reacted somewhat similarly on May 30 with shares of domestic steel and aluminum makers once again jumping. Shares of United States Steel Corporation (
X - Free Report) rose 2.9%, while AK Steel Holding Corporation ( AKS - Free Report) and Steel Dynamics, Inc. ( STLD - Free Report) rallied 3.6% and 2.5%, respectively.
Similarly, shares of domestic aluminum makers also rose on Wednesday. Shares of Century Aluminum Company (
CENX - Free Report) , Kaiser Aluminum Corporation ( KALU - Free Report) and Alcoa Corporation ( AA - Free Report) jumped 3.8%, 3% and 2.6%, respectively. Each of the above-mentioned stocks have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Summing Up
The U.S. steel and aluminum industry has been suffering for quite some time. U.S. steelmakers have lost three fourth of their jobs between 1962 and 2005.
The Trump administration’s plans of imposing tariffs on imported steel and aluminum come with the objective of protecting the domestic steel and aluminum industry by increasing production, which will eventually help in creating more jobs. Trump has constantly been stressing on the need to save these industries that have been treated unfairly by other countries. However, if the United States now announces tariffs on the EU, Canada and Mexico, it now needs to be seen how these countries react.
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