Section 232 tariffs
Section 232 tariffs came into effect on March 23, 2018. It’s been six months, so it’s a good time to see how they’ve impacted the US steel industry. When the tariffs were first announced, there were no exemptions on a country level. However, even before the tariffs came into effect, we saw exemptions for several regions, including NAFTA (North American Free Trade Agreement) companies and the European Union.
These exemptions, however, were temporary, set to expire on May 1. They were extended another month when the Trump administration tried to negotiate quotas and a broader trade deal with the exempted countries. But in June, the temporary exemptions for NAFTA and the European Union weren’t extended. Brazil, South Korea, Argentina, and Australia managed to get long-term exemptions. However, except for Australia, steel imports from other countries were subject to a quota.
In August, President Donald Trump announced another change to Section 232 tariffs by doubling the tariffs on Turkey, which is among the largest steel exporters to the United States. In September, the Trump administration relaxed the quota rules for countries that are exempt from Section 232 tariffs.
Meanwhile, the markets have been rather cold toward US steel stocks this year. U.S. Steel Corporation (X) and AK Steel (AKS) have lost 16.7% and 16.2%, respectively, based on the closing prices on September 21. Cleveland-Cliffs (CLF) has outperformed the broader steel space (NUE), rising 68.6% year-to-date. The SPDR S&P 500 ETF (SPY) has risen 10.8% over the period.
In the next part, we’ll see how US steel prices have reacted to Section 232 tariffs.