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How Much Trump’s ‘Easy to Win’ Trade War Has Cost Alcoa Investors


Jun. 4 2019, Published 11:46 a.m. ET


Alcoa (AA), the leading US-based aluminum producer, is trading in the green today. The stock was also up on June 3.

Prior to that, though, the stock saw a selling spree and hit a 52-week low in May. If we look at its year-to-date price action, we’ll find that Alcoa has lost 20% based on its June 3 closing price.

Last year, President Donald Trump imposed a 10% tariff on US aluminum imports. However, despite the tariffs, we haven’t seen any revival in US aluminum producers’ fortunes. Alcoa stock has fallen more than 50% since March 2018, when President Trump announced the Section 232 aluminum tariffs.

The president famously said last year that “trade wars are good, and easy to win,” but Alcoa’s price action paints a different picture. Steel stocks have been even worse off this year. Last year, Trump also imposed a 25% tariff on US steel imports.

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The China factor

Alcoa’s sell-off could be attributed to China’s slowdown and the escalation in the US-China trade war. Metals and mining companies such as Alcoa are heavily dependent on Chinese metal consumption. However, as China’s economic indicators—especially car sales—show slowing growth, aluminum prices have come under pressure. To add to the aluminum industry’s woes, Chinese aluminum exports are running at near-record levels.

President Trump

In May, President Trump fully exempted Canada and Mexico from the Section 232 tariffs. The move was expected to bring some respite to Alcoa, as the company ships aluminum from its Canadian smelters to the United States. Alcoa paid ~$32 million in tariffs in the first quarter.

Alcoa wasn’t enthusiastic about the Section 232 tariffs from the start. It called upon the Trump administration to address the core issue of Chinese overcapacity. However, almost 15 months after the enforcement of the tariffs, China continues to export near-record levels of aluminum every month.


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