Last year, Donald Trump imposed a 25% tariff on US steel imports. The tariffs cover most countries, including North American and European allies. China (FXI) is also covered under the tariffs. Last year, when the United States and China reached a temporary trade truce while broader equity markets rallied, steel and iron ore stocks, including U.S. Steel Corporation (X), AK Steel (AKS), and Cleveland-Cliffs (CLF), fell. Markets feared that Section 232 tariffs on Chinese steel and aluminum products might be waived, though it was later clarified that Chinese steel products were still subject to the tariffs.
A trade truce might help
As noted previously, a US-China trade truce could improve investor sentiment for US steel companies as well. Falling Chinese steel prices have taken a toll on US steel prices, and a US-China trade deal could help stabilize Chinese steel prices. US steel companies have been pushing for price hikes as US steel prices have fallen sharply over the last six months.
So far, the Trump administration has stood firm on its support for the US steel industry, with its NAFTA renegotiation a case in point—steel from Canada and Mexico still attracts Section 232 tariffs despite the three countries’ broader trade deal. It remains to be seen whether China manages to get Section 232 exemption as part of a trade deal.
Meanwhile, after a dismal 2018, Chinese stocks (TCEHY) have strengthened this year. As of February 22, Alibaba (BABA), Baidu (BIDU), JD.com (JD), and NIO (NIO) had gained 29.0%, 5.4%, 24.0%, and 28.3%, respectively, year-to-date. Next, we’ll see how Trump’s tariffs have affected US steel jobs.