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Trump's Steel Tariff Proposal May Not Come To Pass

Mar. 02, 2018 9:12 AM ETCENX, FOIL, NUE, SLX9 Comments
Cash-Centered Creep profile picture
Cash-Centered Creep


Steel stocks surged on Thursday, March 1st, when President Donald Trump announced that he will sign a measure that will impose a 25% tariff on steel and a 10% tariff on aluminum. The announcement comes on the heels of a "listening session" at the White House that Trump held with chief executives from relevant companies such as John Ferriola of Nucor Corporation (NUE) and Mike Bless of Century Aluminum Company (CENX). To quote Trump himself:

Sometime next week we'll be signing it in. And you're going to have protection for the first time in a long time.

Image from Newsweek.

How lasting such protection is likely to be is something that investors should think about first. If history is any guide, such protectionist proposals are unlikely to be permanent.

On March 6th, 2002, nearly sixteen years ago, President George W. Bush imposed tariffs of up to 30% on steel imports from Asia, Europe and South America. He stated that the tariffs would be in place for three years to permit American steel firms to recover from the same problem they face now - low steel prices due to cheap steel from foreign countries. To quote President Bush:

I decided that imports were severely affecting our industry, an important industry, in a negative impact, and, therefore, provide temporary relief so that the industry could restructure itself.

However, on December 4th, 2003 - twenty one months after the initial measure - Bush lifted the tariffs, stating that the U.S. steel industry was now healthy, in stark contrast to those within the industry who argued that more time was needed to recover. The real reason, however, was more straightforward - international pressure, especially from Europe and Japan, forced Bush to lift the tariffs well ahead of the initial March 2005 expiration date.

This article was written by

Cash-Centered Creep profile picture
Buy and hold, common stock investor focused on dividends and on value. Interested in various stocks that are suitable for long-term dividend investment. A Buffett admirer, but not a Buffett cultist, and not quite as creepy as my name implies - though certainly cash-centered!

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (9)

GreenPirate profile picture
The Trump photo on this page is quite telling. Donald Trump has always been hyper emotional, and he pushes people into arguments. Its his persona. It is 'entertaining' for some people... But awful in a US President.

Trump has come across consistently as an unrepentant bully. Yet when it comes to steel tariffs, Warren demonstrated her ability to be cool, calm and collected, to stand above the President's name calling, and refuse to join with the GOP in blocking his trade tariffs.
I personally disagree with her, though I think the President and Congress could have done a lot more to gain the support of Congress, various parts of industry, and the unions.. But I respect Warren for standing up for what she believes in despite any political fall out.

I'm tired of the GOP members constantly hurling partisan complaints about "Liberals"... They are being divisive, bad for the country. They should remember the real history here and stop trying to rewrite it. GOP members are also pushing the kind of radical and angry sounding rhetoric that causes some to lose their objectivity about various topics and issues.

Enough already. We had the GW Bush years, which left the USA in economic danger. Obama helped to set that ship right. GOP should be thankful that they had so much varied backing that they got into office despite Obama's obvious success. The latest round of votes was a disaster... many voters lost their right to vote due to a new computer system called "Crosscheck".. and some states have abandoned that program due to problematic results. Let's hope 2018-2019 leads us into a new more unified phase and away from this wretched name calling hostility that has no place in the White House or in US politics in general.

On to what's best for the country.

As GOP considers blocking tariffs, Elizabeth Warren, other Democrats back Trump"
Published: Mar 12, 2018

"Republican lawmakers are openly discussing legislation to limit President Donald Trump’s trade powers after the White House detailed plans last week to impose global tariffs on U.S. imports of steel and aluminum.

But the support of key Democrats — including Sen. Elizabeth Warren, D.-Mass. — for Trump’s “America first” approach to trade stands to complicate any GOP effort to tie the president’s hands."
Tariffs on Steel and Aluminum when American Metal fabricators don't manufacture the required "Specialty Steel", according to Exxon. Such a Tariff will cost rather than provide Earnings for American companies.
smurf profile picture

Timely and informative article.

Did you see Wilbur Ross on CNBC today? He broke things down really well, I thought. From what he said, even AFTER new tariffs, the U.S. will still have the among the lowest in the world, especially compared with the EU, China and Japan.

To be cynical, won't hurt Trump with the unions, either, whose support he'll need in '20
The U.S. Imported ~8x as much Steel from Canada than China.
Jeremy Blum profile picture
The taiffs hurt way more than they help. STLD and NUE are healthy, so they only help a few companies like X and AKS, maybe AA.

They hurt, all steel users such as auto and truck makers, steel can users, appliance makers, the cost of construction projects and much more. They also hurt the consumers of those industries with higher costs, that means all of us.

Whats more, these tariffs like the others Trump has done are completely unnecessary. We have a 4% unemployment rate in this country, which is considered full employment. So we are not protecting workers.

Trump says without a steel industry we have no country. That is so 60 years ago. Our country excels at cutting edge information and medical technology, innovation, marketing, secondary education, capital availablility and infrastructure. We are way ahead in most of those areas.

And besides, we HAVE a steel industry, that was not going away.
Jeremy Blum,

You are exactly right regarding the lack of need of any of these tariffs. However, "Full Employment" shouldn't be confused with wages keeping up with productivity, because they haven't. I truly pity wage earners today, as the trend under GOP Federal and individual States' edicts have effectively destroyed their purchasing power and ultimate sustainability. Just how do American wage earners buy health insurance today under the Trump regime? Tax cuts come at a price and in States like Kentucky, GOP governors have completely undercut entitlements to wage earners who can better be described as the "Working Poor". Unfortunately, they'll probably reelect the Congress, as it is, in the mid-term elections with few improvements until 2020.
bobkcinremah profile picture
Thank you for your article. I have worked in the steel industry for 47 years and have seen first hand how the input of steel coming in from China, Japan Germany has affected the steel industry. Now as long as US Steel and Nucor don't go crazy and raise their prices which has happen in the past, this move will help Steelworkers and open the door to good paying jobs and help union's pay into their pension's. Arcelomittal already is a world wide leader in steel production which also has many plant in the USA.and oversea'shave good paying jobs
IDSA best microcap way to play. Stock just starting to move.
thanks for the heads up. I'm gonna start stock piling idsa. 2.08 was a pretty good entrance last week eh?
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