President Donald Trump's Friday announcement that steel and aluminum tariffs will double to 50% on June 4 sent shares of U.S. producers surging early Monday, including Nucor, Cleveland-Cliffs and Century Aluminum. But General Motors and Tesla, which stand to face higher materials costs, are lower.
Trump made the announcement at a Friday rally near Pittsburgh, celebrating Nippon Steel's deal to buy U.S. Steel, which he blessed after the Japanese company pledged to build a new mill and double its spending plan.
Steel Price Surges On 50% Tariff
"Nobody's going to get around that," Trump said Friday, in announcing the 50% steel tariff. The move appears calculated to ensure that his support of the controversial Nippon-U.S. Steel merger doesn't come back to bite Republicans.
Steel stocks were broadly lower on May 23, when Trump first signaled support for the merger. Investors in Nucor, Steel Dynamics and Cleveland-Cliffs adjusted to the new reality of a financially strengthened rival and extra steelmaking capacity, a negative for steel prices.
U.S. steel coil futures initially surged from around $750 a ton to $940 after Trump dramatically expanded the reach of the 25% steel tariff announced in his first term, including ending exemptions granted to key trading partners. But the price had fallen back to around $780 a ton before Trump's latest announcement sent it shooting up to $920.
BMO Capital upgraded Nucor to an outperform on Monday, while raising its price target to 145 from 140. The firm says Nucor's relatively low capacity utilization rate makes it particularly well positioned to benefit from the doubling of Trump steel tariffs.
Trump Tariffs: Possible Fallout
There's a risk that the economic gains from higher steel tariffs could be more than offset by the downside. That's what happened after President George W. Bush imposed steel tariffs in 2002, as job losses in steel-consuming industries outpaced gains in steel industry employment.
Big consumers of steel, like the auto and canned goods industries, may have to pass along price increases, increasing inflation. That could contribute to the Fed slow-walking further rate cuts.
The doubling of Trump tariffs on steel and aluminum also creates another obstacle to reaching deals with key trading partners as the clock ticks on Trump's 90-day delay in ratcheting up reciprocal tariffs. However, those tariffs face a cloudy future after the U.S. Court Of International Trade ruled that Trump exceeded his authority in announcing the "Liberation Day" tariffs on April 2.
Some policy analysts speculated that Trump could put greater focus on sectoral tariffs, as opposed to country-focused tariffs, in the wake of that ruling. For now, however, reciprocal tariffs remain in effect thanks to a federal appeals court's stay of the trade court's ruling.
Nuecor, Cleveland Cliffs, Century Aluminum
Nucor and Steel Dynamics both powered up more than 10% early Monday, while CLF surged 23%. U.S. Steel, which soared on May 23 on a positive merger outcome, is off 0.6%.
Century Aluminum leaped 21% early Monday, which puts it on track to reclaim its 50- and 200-day moving averages. Alcoa is off 1.8%, likely related to its different geographic profile.
GM and Tesla both slipped around 1%.
