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Who’s Benefiting from President Trump’s Tariffs?

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Jul. 16 2019, Updated 2:36 p.m. ET

President Trump’s tariffs

President Trump’s Section 232 tariffs were expected to lead to a revival in the US steel industry. There has been an increase in US steel production. Companies have been running their plants at high utilization rates to capitalize on higher margins. U.S. Steel Corporation (X) has restarted two blast furnaces at its Granite City facility, while Nucor and Steel Dynamics are posting record earnings. Even unionized workers at U.S. Steel Corporation have reportedly managed to get higher compensation. Higher steel prices have improved their bargaining power.

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Price action

Meanwhile, markets have been pessimistic towards US steel stocks. Barring Cleveland-Cliffs (CLF), which supplies iron ore to US steel companies, most of the other steel plays including AK Steel (AKS) are trading with a year-to-date loss. Even a $2 billion share buyback program didn’t lift Nucor’s sagging stock price.

On the downstream side, end users have increased their pitch against higher steel and aluminum costs. This week, speaking at an event, Joe Hinrichs, Ford’s (F) president of global operations, said that US steel prices are the highest in the world. He added that the company has told the Trump Administration that “we need to have competitive costs in our market in order to compete around the world.” Other metal end users like the Coca-Cola (KO) have also noted higher input costs after the Section 232 tariffs.

Steel stocks haven’t seen any real rally after the tariffs. On the other hand, higher steel prices have only added to the woes of downstream users like the housing and automotive sectors.

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