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Chart of the Day / Tariffs and Trade Wars: Winners and Losers

Tariffs and Trade Wars: Winners and Losers

June 15, 2018

In early June 2018, the Trump Administration imposed tariffs on steel and aluminum exports from three of its closest trading allies – Canada, Mexico, and countries in the European Union.

And the trade war began.

The tariffs – 25% on imports on steel and 10% on aluminum – didn’t sit well with these other countries, which referred to U.S. actions a violation of trade rules, imposing countermeasures of their own.

Canada said it would impose retaliatory tariffs on US goods including steel, aluminum, and more — up to a value of $16.6 billion. In addition to the industrial metals, the Canadian tariffs would apply to some consumer products, such as maple syrup, pizza, and toilet paper.

Mexico said it would impose “equivalent measures” on U.S. products – including flat steel, lamps, pork legs, apples, grapes, cheeses and more.  The tariffs range between 15% and 25%, and could raise the price of US goods by that amount.

The EU will impose tariffs on US imports ranging from Harley-Davidsons as well as industrial and agricultural products, including bourbon, peanut butter, cranberries and orange juice.

Of course, there are winners and losers here. Let’s start with the winners.

The steel industry for example is elated about the tariffs.  Moody’s Investors Service even upgraded its outlook on the US steel industry—boosting it from “stable” to “positive”.   Such news even sent related stocks higher.

  • U.S. Steel (X) ran from $35 to $37.70.
  • AK Steel Holding (AKS) ran from $4.30 to $4.80
  • Nucor Corporation (NUE) ran from $62.50 to $67
  • Steel Dynamics (STLD) ran from $49 to $50

And there are losers, too.

While steel and aluminum companies in the US should benefit from the tariffs, it may not all be good news for US consumers.

For example, Harley Davidson (HOG) could be pinched with the rising costs of steel and aluminum, and in higher prices of its sales outside of the U.S.  “Import tariffs on steel and aluminum will drive up costs for all products made with these raw materials, regardless of their origin,” said the company, as quoted by CNBC. “Additionally, a punitive, retaliatory tariff on Harley-Davidson motorcycles in any market would have a significant impact on our sales, our dealers, their suppliers and our customers in those markets.”

The steel and aluminum tariffs could raise prices for beer, for example, and other products that use metal as containers.

“Over the long run, these tariffs will drive aluminum prices higher globally, increasing the cost of beer production for all brewers,” said Jim McGreevy, president of the Beer Institute, as quoted by USA Today.  “Eye makeup is particularly at risk, according to Panjiva S&P. U.S. exports of eye make-up to Europe totaled $236 million in the 12 months ended in March.”

While it’ll be interesting to see what happens next in the trade war, keep an eye on these stocks for potential opportunities.  And remember, once the trade war comes to an end, each of these stocks could see a reversal on the news.