Stock of the Day: US Steel surges 6% on Trump plan for metal tariffs

The move:

Shares of
US Steel
jumped as much as 6% on Monday to trade at $39.18.

The chart:

Why:

The move came after President Donald Trump told reporters on Air Force One on Sunday that he planned to impose 25% tariffs against all imports of steel and aluminum.

The tariffs are expected to be formally announced on Monday.

That’s good news for domestic steel producers because the tariffs would make it more difficult for foreign companies to flood the US market with lower-priced steel, which should support demand for steel produced by US companies. It could also give US metals producers the flexibility to hike their own prices, which would help boost their profits.

Shares of America’s largest steel company,
Nucor
, jumped 7%, while other steel and aluminum companies’ stock also jumped.
Cleveland-Cliffs
rose nearly 15%,
Steel Dynamics
was up 6%, and
Alcoa
rose 4%.

What it means:

If implemented, the tariffs will almost certainly increase the cost of key building inputs for everything from cars to skyscrapers, and they’ll probably hurt Canada more than China.

Canada, Brazil, and Mexico are the top three steel suppliers to the US, while China is the 10th-largest supplier.

Trump has imposed tariffs on steel before. In March 2018, he slapped a 25% tariff on steel imports and a 10% tariff on aluminum imports from various countries, including China.

What the pros are saying:

“Planned US steel and aluminum tariffs would hit Canada and Mexico hardest, if they can’t find other outlets; the US is their primary buyer,” Thierry Wizman, a strategist at Macquarie, said in a Monday note. “Still, as the US administration sees it, building new steel and aluminum capacity in the US is a critical national security imperative — that’s the real reason for these tariffs.”

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