President Trump’s planned tariffs have been causing some volatility in some sectors. The proposed tariffs have some Republicans worried since there will be some consequences. President Trump is looking to impose a 25% tariff on imported steel as well as a 10% tariff on aluminum. That said, let’s take a look at how we reached this point and some implications for steel and aluminum stocks. We’ll also look at some of the top steel and aluminum stocks to watch if this tariff does go through.
Commerce Department recommends tariffs on steel and aluminum
Commerce Secretary Wilbur Ross suggested three potential options for tariffs. Ross suggested that Trump either impose tariffs across the board on steel and aluminum, target specific countries and charge them even higher tariffs, or limit the total amount of steel and aluminum coming into the U.S. For steel, Trump may look to raise 24% on imports from all countries; tariffs of at least 53% on imports from 12 countries (including China, Russia, Brazil and South Korea); or cut imports of steel into the U.S. by 37% from all countries.
On the aluminum side, Ross provided Trump with these options:
- A 7.7% tariff across the board from all countries
- Cut aluminum imports from all countries by approximately 13%
- A 23.6% tariff on select countries, including China, Hong Kong, Vietnam, Russia and Venezuela
There are several consequences that would take place if any of these decisions are made, including heavy effects on steel and aluminum stocks. Of all these options, Trump looked to place a 25% tariff on steel imports and a 10% tariff on aluminum. If these tariffs are placed it will increase the cost of buying steel and aluminum from select countries, which would make buying these materials from the U.S. more appealing. As a result, there would be an increased demand for these resources and heavy changes to the value of steel and aluminum stocks. Let’s take a look at what happened to the top steel and aluminum stocks when some clues were provided for the tariff.
Top steel and aluminum stocks to watch
U.S. Steel (X) is one steel stock traders should keep an eye on. The steel tariffs would certainly affect X, which is considered one of the top steel stocks. If tariffs do rise by 25%, this will drive companies to U.S. steel. In turn, this would increase X’s revenues and earnings. With that in mind, traders may want to keep an eye on this steel stock, especially if these tariffs are passed.
Check out the daily chart on U.S. Steel. If you notice, X has some consolidation, and if it breaks above the top end of the coil area with some volume, it could run higher due to the tariffs. With that said, the community will definitely be keeping an eye on this one.
Nucor Corp. (NUE) is another steel stock to watch. It is currently consolidating at these levels and forming a bull pennant. Now, the stock has a flat top at the $70 level. If it breaks out of the pennant and builds momentum, it could potentially continue above the $70 level. Here’s a look at NUE on the daily chart.
Traders may also want to keep an eye on AK Steel Holding Corporation (AKS). This is another steel stock that could move if the tariffs go through. Take a look at the daily chart below.
AKS is consolidating here and looks like it’s forming a bull flag pattern. That said, if it breaks above $6 behind some volume, it could potentially break the recent highs.
If the demand for aluminum in the U.S. rises due to the tariffs, one stock that could move is Alcoa Corp (AA). Here’s a look at Alcoa Corp (AA). Now, this aluminum stock is fairly weak. However, it’s consolidating at these levels and a double bottom looks to be forming. If this stock breaks above the downtrend line and moves above $50, it could have legs and break out above the previous resistance level.
Politics are affecting aluminum and steel stocks, and if President Trump approves any of the proposed changes, stock prices will change even more. If the tariffs go through, we could see some of the top steel and aluminum stocks run higher. Keep in mind that these stocks must be domiciled in and produce either steel or aluminum in the U.S. Otherwise, they would be subject to the hefty tariffs. That said, the top steel and aluminum stocks are on the radar, and I will be closely following the charts.
Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks.