Proposed U.S. crackdown on aluminum, steel imports roils stocks

Last Updated Feb 16, 2018 4:48 PM EST

U.S. steel and aluminum producers saw their shares jump following a Commerce Department proposal that President Donald Trump impose tariffs or quotas on imports of the metals.

Shares of U.S. Steel (X) surged more than 12 percent and aluminum producer Alcoa (AA) advanced nearly 3 percent after Commerce Secretary Wilbur Ross offered Mr. Trump a range of options to bolster U.S. production. Reversing course higher, Nucor (NUE) was up more than 4 percent, and Steel Dynamics (STLD) climbed more than 4 percent.

Mr. Trump, who during his 2016 presidential run campaigned on a platform of economic nationalism, has recently taken measures to signal his administration's willingness to get tougher on trade. In January, he approved tariffs on imported solar-energy components and large washing machines in a bid to help U.S. manufacturers.  

For now, however, Mr. Trump has stopped short of policies likely to trigger a full-blown trade war with other major countries around the world. Should he opt to impose trade sanctions, the response by China would depend on how aggressive the White House move proves to be. If it involves "limited tariffs and investment constraints, this would be nothing new," economists at Capital Economics said in a recent client note. 

Trade measures targeting Chinese steel and aluminum shipments would have only a modest impact. China exported just $2 billion of steel products and a like amount of aluminum to the U.S. last year, with exports of both already limited by anti-dumping measures.

In addition, "while the U.S. sells less to China to vise versa, Chinese officials have greater leeway to make life difficult for U.S. firms," Capital Economics noted.

The options laid out by the Commerce Department include a blanket tariff on all imports of aluminum or steel from all countries; a 23.5 percent tariff on all aluminum; a 24 percent tariff on all steel products; or no tariffs at all, U.S. Secretary of Commerce Wilbur Ross said in a press briefing on Friday. 

The recommendations drew a positive response from the Economic Policy Institute, which called trade remedies for steel and aluminum long overdue.

"The United States should impose strong restrictions on imports of steel and aluminum, and should work with other nations to develop coordinated responses to excess capacity and unfair trade in these products," EPI said in a statement

Mr. Trump must decide by April 11 whether to proceed with trade sanctions on steel and by April 19 for a decision affecting aluminum imports.