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:
Cleveland-Cliffs: +32.8%
Nucor: +14%
Steel Dynamics: +5.9%
Century Aluminum: +13%
U.S. Steel: Flat
Alcoa, Kaiser Aluminum: Flat
ArcelorMittal: Shares dropped
Acerinox: Shares jumped
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:
President Trump has announced that the steel and aluminium Section 232 tariffs will be doubled to 50% on June 4.
In March, the S232 aluminium tariff was increased from 10% to 25% and all exemptions to the steel and aluminium tariffs were removed. Since then, the prices that U.S. steel and aluminium consumers pay have risen, with U.S. steel prices now accounting for 100% of the higher tariff[1] and the U.S. Midwest aluminium premium - the price paid on top of the LME price of physical delivery - accounting for ~85%[2] of the current 25% tariff.
On the investment front, since the tariff increased, the UAE firm Emirates Global Aluminium has announced a $4bn investment in a US-based aluminium smelter with first production scheduled in 2030. No major new steel investments have been announced, but the previously announced major investments from Japan's Nippon Steel and South Korea's Hyundai are starting to progress after delays.
The market expectation is that overseas companies that invest will get some form of tariff relief on current shipments to the U.S., which poses a risk to full tariff pricing.
If the higher metals tariffs come into effect, and remain in place, the U.S. Midwest aluminium premium would need to rise to around 68-70c/lb from 38c/lb to keep imports flowing. The U.S. spot steel (hot rolled coil) price is now at $888/st[3], up 29% YTD (but down 10% from the March highs). While U.S. steel futures are likely to rally if the new 50% tariff comes into effect, we maintain the view that the full tariff (either the existing 25%, or announced 50%) does not need to be accounted for in spot prices (for now), due to still-high U.S. steel inventories, lacklustre demand, and a relatively low import requirement. Higher prices are also likely to weigh further on U.S. steel demand from the manufacturing sector, which we already expect to contract this year.
We think the higher metals tariffs lifts the probability a copper import tariff is imposed following the ongoing S232 investigation - which we already thought was underpriced. However, any future U.S. copper investments may come with some form of duty exemption, which could undermine full duty pricing. The Dec-25 U.S. copper price was trading at a 12% ($1,135/t) premium to the London traded global benchmark on Friday, suggesting $1,235/3,605/t upside if a 25/50% tariff is delivered. We therefore reiterate our long Dec-25 COMEX-LME copper arbitrage trade recommendation.
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.
