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The steel industry is one sector that could benefit most from Trump’s policies. Lower corporate taxes and less burdensome labor regulations promise to increase profit margins—and stronger economic growth overall means greater demand for US steel producers.

As a presidential candidate, Donald Trump promised to unleash the American economy by slashing corporate and income taxes and cutting red tape. As president, Trump has mostly stayed true to his promises, although Congress still hasn’t delivered on healthcare, financial, or tax reform.

There’s another way President Trump can help the steel industry: By protecting it from competition from foreign steel producers. In April, the president signed an executive order asking the Commerce Department to investigate whether steel imports are a threat to state security.

Chinese Steel is the Main Competitor

The investigation is looking into steel imports generally, not just imports from China. However, the country can’t be ignored. In US political language, “trade policy” essentially means “China policy.”

Remember: On the campaign trail, Trump promised to get tough on the Chinese for their exchange rate and export practices, which he blamed for flooding the US with imports. Also this week, three senior administration officials told Reuters that President Trump is looking at ways to pressure China, steel tariffs being just one of them.

The Commerce Department’s investigation is being made under Section 232—part of the Trade Expansion Act of 1962 that allows the Secretary of Commerce to determine the effect of imports on national security.

Here, the implication is clear. China is one of the US’s biggest rivals, and by threatening the viability of the American steel industry, China threatens the viability of the American economy—and eventually, national security itself.

What Higher Tariffs Mean for Stocks

Aldo Mazzaferro, the managing director of Macquarie, said this: “There is a lot of anticipation that there is going to be a statement by the Commerce Department today or later this week that suggests Trump impose something like the 232 tariffs.”

US steel producers have already gotten a boost on stock markets, and the investigation isn’t even over yet. The fact that Trump did so much as sign the executive order sent a strong message: His administration is committed to supporting American steel producers, even if that means slapping tariffs on foreign competitors.

The United States Steel Corporation, the benchmark for the industry, have had a choppy 2017. The company took a dive in February after it became clear that President Trump’s $1 trillion infrastructure plan probably won’t be passed by Congress this year.

However, U.S. Steel shares—which trade under the symbol “X” on the NYSE—have been gaining strength as of late. U.S. Steel shares gained 6.5% from June 27-29—after it was revealed that the Commerce Department is close to publishing the results of its investigation.

Also, the relative strength index—which measures whether a stock is overvalued—put U.S. Steel at 57, meaning its share price accurately reflects its real value.

AK Steel Holding Corp. (AKS) is another steel producer on a “Trump Bump.” AKS shares gained 3.8% from open on June 27 to open on June 29.

The Long-Term Impact of Higher Tariffs on Stocks

If the Commerce Department comes out and recommends tariffs on steel imports, American steel producers will see a bump on the stock markets. It would be a good time to buy steel shares. However, the long-term outlook is less positive.

For starters, 2017 hasn’t been a good year for steel shares overall. Imports are just one factor going into that. Also, China and other steel exporters could choose to fight fire with fire, slapping their own tariffs on American steel imports.

The overall outlook for steel is mixed. We’re watching the Section 232 investigation closely and are ready to buy steel shares, but we don’t look at steel as a long-term hold option.