Trump’s steel tariffs
Last year, President Donald Trump imposed a 25% tariff on US steel imports and a 10% tariff on aluminum imports.
The tariffs were imposed after an investigation by the US Department of Commerce showed that steel and aluminum imports were a threat to US national security.
Section 232 tariffs
The probe was initiated in 2017 under the rarely used Section 232 of the Trade Expansion Act of 1962. In January 2018, the Department of Commerce submitted its findings to President Trump, and in February, those findings were made public. The president didn’t take much time to act on the department’s recommendations and announced the tariffs in March.
To start off, Canada, Mexico, and the European Union were exempt from the tariffs. However, after two extensions, these regions were also covered. Subsequently, the Trump administration granted long-term exemptions to some countries, including South Korea and Brazil. However, the countries agreed to quotas to receive their exemptions.
While the Trump administration managed to renegotiate NAFTA, making it the United States–Mexico–Canada Agreement, Canada and Mexico are still covered under the Section 232 tariffs. Previously, President Trump had linked Section 232 exemptions for Canada and Mexico to NAFTA renegotiation talks.
Meanwhile, despite the tariffs, US steel stocks fell sharply last year. U.S. Steel Corporation (X) and AK Steel (AKS) fell 48.2% and 60.2%, respectively, while Nucor (NUE) fell 18.5%. ArcelorMittal (MT) and Steel Dynamics (STLD) also fell sharply. Barring Cleveland-Cliffs (CLF), which saw upward price action of 6.6%, leading steel and iron ore players (XME) underperformed the broader markets (SPY) last year.
Could President Trump’s tariffs rescue US steelmakers this year? We’ll discuss this possibility in the next article.