Earlier this year, President Trump imposed a 25% tariff on US steel imports and a 10% tariff on aluminum imports. The tariffs were imposed after the Commerce Department’s findings found that steel and aluminum imports are a threat to US national security. After the tariffs, US steel prices rose to multiyear highs. US Midwest physical aluminum premiums also spiked. However, steel and aluminum stocks haven’t really found favor with markets despite the tariffs.
U.S. Steel (X) and AK Steel (AKS) have lost 15.4% and 21.6% year-to-date (or YTD), respectively, based on August 31 closing prices. The performance of aluminum stocks hasn’t been any better, and Alcoa (AA) is trading with a YTD loss of 17.0%. However, Cleveland-Cliffs (CLF), which supplies iron ore to US steel companies, has gained 39.4% YTD. In comparison, the SPDR S&P 500 ETF (SPY) has gained 9.7% so far in the year.
While the US steel industry already had several trade safeguards in place, the Section 232 tariffs have offered blanket protection. This isn’t the first time that the US steel industry has received blanket trade protection. In 2002, then-President George Bush also experimented with steel tariffs. However, in less than two years, the tariffs were lifted.
So, almost six months after Trump imposed steel tariffs, it would be prudent to see whether the tariffs are having the intended effects. But before that, let’s look at the key differences between Trump’s and Bush’s steel tariffs.