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Steel And Aluminum On The Negotiating Table


  • Tariffs and protectionism are bearish for the dollar and increase costs of commodities.
  • The President turns to trade to keep campaign promises.
  • A divided administration.
  • A giant bluff?
  • U.S. Steel is in a good position, but the shares have come a long way.

Last Thursday, after a meeting with the CEOs of America’s leading steel and aluminum producing companies, the President shocked markets. President Trump announced this week he would sign an order imposing a 25% tariff on foreign steel and 10% on aluminum that comes into the United States from other countries. The move, to support U.S. production, is the next step in the President’s plan to level the playing field when it comes to global trade. On so many occasions, on the campaign trail and after the election, multilateral trade agreements and previous deals have been in the crosshairs of President Trump’s plans to put America first. In Davos, Switzerland early this year, the President told other world business and political leaders that making America first did not mean America alone as growth in the world’s wealthiest nation translates to growth around the globe. However, the President demanded a reform of the international trade system to make it “fair and reciprocal.”

Last week, the first concrete action of the administration was to raise the immediate threat of tariffs on two strategic metals and building blocks for infrastructure. Stocks moved lower after the announcement and the dollar reversed from a rally that took it to a new short-term high. The leader of the free world fancies himself as a master negotiator, and there may be more to last week’s announcement than meets the eye.

Tariffs and protectionism are bearish for the dollar and increase costs of commodities

Stocks dropped hard after Thursday’s announcement, and it was another ugly week in the equities market. After beginning the week on a high note, Thursday’s announcement exacerbated selling in equities on Tuesday and Thursday as the ramifications of tariffs on steel, aluminum, and other potential imports began to filter through the market. Tariffs amount to taxes for consumers and automobile manufacturers

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This article was written by

Andrew Hecht profile picture
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

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.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

TheRod1 profile picture
China is so concerned about these tariffs, they have decided to put 3,000,000 of their best men in it.
Andrew, Very interesting read, Thank you for your thought provoking article. US Steel will of course benefit from any steel tariffs against the rest of the worlds steel imported into the states. I think that all the steel producers will benefit as well.

I think the real benefit will be in the producers of raw materials to produce steel. There are already mines for MET coal, which is exported around the world, iron ore pellets mined and refined out of the iron range in Minn. Many other components for making steel still available in the states.

Aluminum is readily recycled, price paid for scrap alum cans at my local scrap yard has been in the .35-.40 per lb for years. In the 90s it was widely reported that if US recycled scrap soda cans we would not need to import aluminum. That may have been true back then but we did not so now we import, garbage dumps and landfills will be the future goldmines.

Intellectual property "rights" what Apple phones, movies ...doubtful value in a real world full of material needs.
zito profile picture
Trump's trade move against China although unpopular in the investment community is very popular with the general public. I am in favor of getting China to negotiate free trade.
Although I don't think steel is very important to our economy; technology and intellectual property rights are very important.
buddyrow4 profile picture
Trump did basically say in tweets that the threat of tariffs would be used as leverage to renegotiate NAFTA which was part of his campaign rhetoric. So I'm looking at it as a bit of a bluff now but he could still follow through with them....
Ben Gee profile picture
If the US follow through with tariffs, it will create a lose-lose situation.
The US and trading partners will be worse off.
sid gold profile picture
Another great professional article
I completely agree
Most likely Trump was placing a shot across the bow and will not actually do as much especially to Canada n Mexico
His North Korea stance seems to be bearing fruit as North n South are talking

Thanks again

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