The Trump Effect: How Stocks were Affected by Tariff News

President Trump has proven himself to be quite a catalyst for stocks.

Defense, biotech,, retailers, infrastructure and cyber stocks – and now steel and aluminum stocks have been moved by mere mentions and tweets from the President.

For example, in late May 2018, the Trump Administration imposed tariffs on steel and aluminum exports from three of its closest trading allies – Canada, Mexico, and countries in the European Union. The tariffs — 25% on imports of steel and 10% on aluminum — were expected to lead to retaliation from European nations, says National Public Radio.

"The EU believes these unilateral US tariffs are unjustified and at odds with World Trade Organization rules.  This is protectionism, pure and simple," said President of the European Commission, Jean-Claude Juncker, as quoted by CBS News. The EU will seek to "rebalance the situation by targeting a list of U.S. products with additional duties."

Mexico had vowed to impose "equivalent measures to various products in the face of U.S. protectionist measures." It could target products, including food such as pork legs and shoulders, sausages, apples, blueberries, and various cheeses.

Canada also issued noted it intended to impose countermeasures against the U.S. in response to the tariffs at the time. Among the countermeasures is $16.6 billion in retaliatory tariffs in steel row. "These countermeasures will take effect on July 1, 2018 and will remain in place until the U.S. eliminates its trade-restrictive measures against Canada.”

Just the news of a trade war was enough to move the needle on related stocks.

Shares of U.S. Steel (X) are already up from $35 to $38.

AK Steel Holding (AKS) is up from $4.30 to $4.80 so far

Century Aluminum (CENX) ran from $16 to $17.90 so far

Steel Dynamics (STLD) ran from $49 to $50 so far

Nucor (NUE) began to shoot higher especially after they noted that their earnings could significantly increase in the second quarter based on tariff concerns. In fact, just days after the tariff announcement, shares of NUE rallied from $62.70 to nearly $67.

Even the Van Eck Vectors Steel ETF (SLX) began to push higher from $48 to $49 on the news. 

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The Bad News

While steel and aluminum companies in the US should benefit from the tariffs, it may not all be good news for US consumers.

For example, Harley Davidson (HOG) could be pinched with the rising costs of steel and aluminum, and in higher prices of its sales outside of the U.S.  "Import tariffs on steel and aluminum will drive up costs for all products made with these raw materials, regardless of their origin," said the company, as quoted by CNBC." Additionally, a punitive, retaliatory tariff on Harley-Davidson motorcycles in any market would have a significant impact on our sales, our dealers, their suppliers and our customers in those markets."

The steel and aluminum tariffs could raise prices for beer, for example, and other products that use metal as containers. "Over the long run, these tariffs will drive aluminum prices higher globally, increasing the cost of beer production for all brewers," said Jim McGreevy, president of the Beer Institute, as quoted by USA Today.  “Eye makeup is particularly at risk, according to Panjiva S&P. U.S. exports of eye make-up to Europe totaled $236 million in the 12 months ended in March.”

It’ll be interesting to see what happen next.

But one thing is for certain – don’t avoid the Trump trades.

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