U.S. steelmakers are expected to benefit from President Donald Trump’s new tariffs, although Wall Street has cautioned about potential risks in the long term. Trump imposed 25% tariffs on imports from Mexico and Canada, as well as a 10% levy on imports from China. The U.S. agreed to temporarily halt tariffs on Mexico for a month in exchange for President Claudia Sheinbaum deploying troops to the northern border.
The stock market reacted to these decisions with an early decline. The Dow Jones Industrial Average initially dropped 600 points at the start of the trading day and was recently down by about 200 points. Steel stocks fluctuated, with Nucor shares rising by about 2% and U.S. Steel increasing by 1% in morning trading, while Steel Dynamics saw a decrease.
The tariffs are anticipated to raise the cost of foreign steel in the U.S., potentially leading to increased domestic production and allowing companies to raise prices. The steel industry has been grappling with cheap foreign imports due to practices like illegal dumping, according to Nucor CEO Leon Topalian.
Canada is the largest steel exporter to the U.S., followed by Mexico. Both countries were initially subjected to tariffs by the Trump administration but later negotiated exemptions in a trade deal. Analysts from Morgan Stanley and UBS foresee higher steel prices in the short term if the tariffs are implemented and maintained, although they also anticipate challenges such as limited demand growth.
Despite the short-term benefits of more expensive imports for steelmakers, analysts from Bank of America Securities caution about potential future challenges. They highlight the risk of reduced auto production, which accounts for approximately 25% of U.S. steel demand, as a factor that could negatively impact U.S. steel stocks in the long term.
