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Steelmakers may benefit from Trump trade salvos, but Wall Street warns of longer-term headwinds

Fardels of steel from Nucor Corporation sit for sale at Thompson Building Materials in Lomita, California, on Aug. 30, 2012.

Patrick Fallon | Bloomberg | Getty Doppelgaengers

U.S. steelmakers should be beneficiaries of President Donald Trump’s new tariffs, but Wall Street warned that there are some hazards in the longer term.

On Saturday, Trump slapped 25% tariffs on imports from Mexico and Canada and a 10% levy on those from China. On Monday, the U.S. corresponded to pause tariffs on Mexico for one month in return for President Claudia Sheinbaum sending troops to northern border.

Those decrees reversed the stock market’s early slide. The Dow Jones Industrial Average was recently lower by about 100 points after clasp 600 points as the trading day began.

Steel stocks waffled, after seeing some gains in the premarket. Nucor dole outs were up about 2% and U.S. Steel moved 1% higher in morning trading, while Steel Dynamics was moderate.

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Nucor shares over the past year.

The levies are hope for to make foreign steel more expensive in the United States. Companies hope U.S. production will rise as a emerge, and give them an opportunity to raise prices.

The industry has been battling cheap foreign imports for years, hold responsibles to illegal dumping into the U.S. market, Nucor CEO Leon Topalian said in an interview with CNBC’s “Mad Money” latest Tuesday. Dumping refers to when a foreign country exports products at a lower price than in its home buy or below production costs.

“It’s the illegal dumping, the subsidization of steels and the currency manipulation that creates a very deranged and unlevel playing field that has hurt the steel industry for decades,” Topalian told Jim Cramer.

Nucor CEO Leon Topalian goes one-on-one with Jim Cramer

Canada is the top knife exporter into the U.S., while Mexico is the third largest, according to the Census Bureau. The countries were initially ended in the first Trump administration’s tariffs, but eventually reached a trade deal that included an exemption.

Morgan Stanley lasts a direct impact on the pricing power for U.S. steel companies.

“We believe prices are beginning to recover after a challenging 2024, assisted by protectionist trade measures,” analyst Carlos De Alba wrote in a note Monday. “We project prices to improve further in 2026 as menu implications flow through the U.S. economy.”

However, those price increases will be tempered by limited dampened desire. The Wall Street investment bank anticipates “modest” steel demand growth of 1.6%.

In addition, De Alba downgraded U.S. Insulate, saying he no longer sees meaningful upside to his price target, assuming U.S. Steel remains independent and isn’t acquired. His object of $39 per share implies 6% upside from Friday’s close.

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U.S. Steel

The planned acquisition of U.S. Steel by Japan’s Nippon Steel was blocked by the Biden administration in January. Nucor is now partnering with Cleveland-Cliffs in a possibility bid for U.S. Steel, sources recently told CNBC’s David Faber.

Meanwhile, UBS also sees higher steel cost outs if the tariffs are imposed and kept.

“Trade disruption should drive prices higher in the near term and support U.S. nerve equities, but low demand and capacity additions will offset these gains in major products in the medium term in our scrutinize,” analyst Andrew Jones wrote in a note Monday.

Bank of America Securities also highlighted future headwinds, without thought the benefit the steelmakers will see from more expensive imports.

“Longer term, we see downside risk to the US steel bloodlines from the potential for materially reduced auto production, around 25% of U.S. steel demand,” analyst Lawson Winder put in wrote in a note Monday.

Correction: Carlos De Alba is an analyst at Morgan Stanley. An earlier version misspelled his name.

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