Breaking: markets react to Trump’s tariffs on steel and aluminum

President Trump has been itching for a trade war since the 1980s, when he started railing about imbalances with China, Japan, and Mexico. Trump used protectionist rhetoric to buoy his support among working class Rust Belt voters on the campaign trail, and often highlighted the flight of manufacturing capacity from the United States to other countries—remember the Carrier air conditioner plant that was going to move to Mexico?

At 1 PM this afternoon, President Trump announced that next week he will use his authority under an obscure trade law provision to impose harsh tariffs on imported steel and aluminum. By making the case that steel and aluminum independence is a matter of national security, the White House gives itself a freer hand to dictate trade policy. The last time the United States invoked national defense concerns to restrain imports was in 1983, regarding machine tools.

Trump said that the United States will charge a 25% duty on imported steel and 10% on aluminum. The goal is to stimulate the smelting and refining of these metals in the United States—to bring back steel and aluminum mill jobs—but a sudden turn toward protectionism after decades of liberalized trade is already having a multitude of unforeseen effects.

Within 90 minutes of Trump’s tariff announcement, the Dow Jones Industrial Average plunged more than 450 points and the Nasdaq Global Auto Index Fund (CARZ), fell 3%, mostly because American automakers will face higher raw materials prices. Boeing (BA), which builds aircraft out of aluminum, was down 3.36% on tariff talk. Northrup-Grumman (NOC), an aerospace and defense manufacturer, saw its stock fall 2.13%.  Ball Corp. (BLL), a can manufacturer, saw its stock drop 1.7%; vertically integrated aluminum producer Kaiser Aluminum (KALU) stock went up 1%.

The United States is currently the world’s largest importer of steel—in 2016, the U.S. imported 30.1 million metric tons of steel—and imports about 90% of the aluminum used in domestic manufacturing. United States Steel (X) stock shot up 5.1%; AK Steel Holding (AKS) increased 7.46%. ArcelorMittal, a large US steel producer, imports Brazilian steel to supply its Alabama plant, and saw its stock drop 1.09%.

Coal mining stocks were up modestly (Arch Coal Inc. was up .64% on the day; Cloud Peak Energy was up .61% on the news); if the tariffs do stimulate domestic steel production, we will need more coal. East coast railroad CSX, which hauls anthracitic coal out of the Appalachians, a grade of coal used for coking in steel production, saw its stock boosted by 1.55%.

This story is developing.

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