Shares of Cleveland-Cliffs (NYSE: CLF) are moving higher this week, up 28.8% from last Friday’s close as of 2:00 p.m. ET. The gain comes as the S&P 500 rose 1.5% and the Nasdaq-100 increased 2.1%. The American steelmaker will benefit from President Donald Trump’s new steel tariffs that went into effect earlier this week.
Foreign steel gets an additional levy
Last week, the Trump administration announced it would raise the already levied 25% tariffs on foreign steel to 50%. On Tuesday, President Trump officially signed the executive order, which went into effect on Wednesday. Now, all steel (and aluminum) imports will be subject to a 50% surcharge, with the exception of steel from the U.K., which will receive a 25% charge.
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While economists are dubious of any positive effects for the broader economy, American steel manufacturers, such as Cleveland Cliffs, will benefit. Their steel will now be significantly more competitive in price.
Image source: Getty Images.
Don’t bet on shifting sands
While Cleveland will benefit in the short term, as we’ve seen, these tariffs are subject to change very quickly and without warning. President Trump’s decisions to impose and then repeal tariffs could easily be described as capricious. Furthermore, even if President Trump remains firm, there is a very good chance that whatever administration follows will reduce or repeal them entirely.
Without them, Cleveland has struggled. It barely turned a profit in 2023 and has operated in the red every quarter since, save for one in which it netted just $2 million on $5 billion in sales. These losses are growing, too. I would stay away from the stock.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
