Who’s Gaining from President Trump’s Tariffs?

President Trump’s tariffs

As we noted previously, several automotive companies including Ford (F) and Harley-Davidson (HOG) have lowered their 2018 guidance. Cost pressure from the Section 232 tariffs, which have lifted US aluminum premiums and steel prices to multiyear highs, are among the reasons behind the guidance cut. Coca-Cola (KO) has also talked about higher input costs.

Who’s Gaining from President Trump’s Tariffs?

US steel and aluminum producers were expected to gain from the tariffs. While US steel companies have welcomed the tariffs, the reaction from US aluminum producers has been mixed. Let’s see what Alcoa (AA), the largest US-based aluminum producer, said about the tariffs.

Alcoa

During the second-quarter earnings call, Alcoa’s CEO, Roy Harvey, said, “While tariffs have pushed the Midwest premium higher, providing U.S. aluminum producers with the benefit, there is no long-term certainty to the duration of those tariffs.” Harvey also said, “232 tariffs are also increasing costs for U.S. downstream manufacturers and will have an impact on their global competitiveness on U.S. consumers and eventually, underlying demand for aluminum in the United States. In short, tariffs will not solve the challenges facing the aluminum industry.”

Guidance cut

Alcoa lowered its 2018 EBITDA guidance by almost $500 million. Now, the company pays tariffs on aluminum shipped from its Canadian smelters to the US. However, the guidance cut isn’t solely due to tariffs. The actual impact of the tariffs is expected to be $72 million–$84 million in the second half of 2018.

Even US steel stocks are having a somber year due to uncertainty about the Section 232 tariffs. AK Steel is among the worst-performing steel stocks this year. AK Steel has a year-to-date loss of 7.7%. So far, the SPDR Dow Jones Industrial Average ETF (DIA) has risen 3.8% this year.

Next, we’ll see how the tariffs are impacting business sentiments.