In late February 2018, we noted:
The Trump Administration recommended steep tariffs on foreign steel and aluminum. In fact, Commerce Secretary, Wilbur Ross, is recommending three options to the President, including imposing across-the-board tariffs on steel and aluminum, targeting select countries with even higher tariffs, and/or limiting the total amounts of steel and aluminum currently flowing into the United States.
Since then, steel and aluminum stocks have shot upward.
- AK Steel (AKS) jumped from $5 a high of $6.80
- U.S. Steel Corporation (X) flew from $39 to $46
- Century Aluminum (CENX) increased from $21.82 to $25
- Steel Dynamics (STLD) jumped from $46.50 to $50.50
- Nucor Corporation (NUE) rose from $65 to $69
Even now, many of these stocks are showing a good deal of momentum, as President Trump moves forward with steel and aluminum tariffs. Currently, he plans to levy taxes of 25% on steel imports and 10% on aluminum imports, arguing that “very stupid” trade deals had allowed U.S. partners to take advantage of the country.
There are a lot of detractors, and such a move was criticized globally.
The International Monetary Fund’s (IMF) Christine Lagarde said she hoped that Trump would not decide to implement tariffs and warned that no one wins from trade wars.
European Commission President Jean-Claude Juncker also said he would react firmly to Trump's threat to impose tariffs on metal imports and the European Union. He’s reportedly drawn up a $3.5 billion hit list of retaliatory tariffs should Trump move forward. In response, Trump reaffirmed his position and said the U.S. could also impose a 25% tax on European cars.
Canada's Trudeau, France's Emmanuel Macron, Germany's Angela Merkel and Britain's Theresa May have said the new tariffs would have damaging effects on the economy. It’s not even favored by some in the Republican Party. In fact, Trump’s top economic advisor Gary Cohn just resigned following a disagreement over the tariff plans.
However, despite criticism, Trump may push forward:
"We're doing tariffs on steel. We cannot lose our steel industry. It's a fraction of what it once was. And we can't lose our aluminum industry; also a fraction of what it once was," he said, as quoted by CNN.
As the story heats up, The Cheap Investor will continue to keep you up to date.