President Trump announced Friday that steel and aluminum tariffs will double from 25% to 50%, calling the move a cornerstone of his "America First" agenda to revive U.S. manufacturing. The tariffs, set to take effect Wednesday, sparked a sharp rally in U.S. metal stocks in premarket trading as investors bet on stronger domestic production and profits.
Trump visited a U.S. Steel plant near Pittsburgh at the end of last week to promote a pending partnership with Japan's Nippon Steel, describing the deal as a "planned investment" that would keep the iconic steel plant operating in the U.S. despite foreign involvement.
He also revealed the increased steel tariffs at the event:
"I believe that this group of people that just made this investments right now are very happy, because that means that nobody's going to be able to steal your industry. It's at 25%, they can sort of get over that fence, at 50% they can no longer get over the fence."
By early Monday morning in premarket trading, shares of steel and aluminum companies jumped on the tariff news:
Chart: Cleveland-Cliffs
BMO Capital Markets analyst Katja Jancic told clients that steel and aluminum tariffs led her to upgrade Nucor from market perform to outperform while downgrading Algoma to market perform from outperform — "as the company is a relative tariff loser."
"Nucor is executing on a multi-year organic growth plan that should, over time, support higher through-cycle profitability and FCF," Jancic said. She set Nucor's price target to $145, implying a 33% increase from the last close.
Goldman analysts Eoin Dinsmore, Aurelia Waltham, and others provided clients with the understanding that steel and aluminum tariffs increase the chances of copper tariffs:
According to Morgan Stanley's trade data, the U.S. imports about 17% of its steel needs, primarily from Canada, Brazil, and Mexico.
The question now is whether the countries most impacted by Trump's new metal tariffs will respond in a tit-for-tat effort.
By Zerohedge.com