Trump Trade Investigation Could Lead to a Boom For Steel and Aluminum
President Trump has harped on cutting the national deficit since his presidential campaign. Now, Trump is taking a new look on that deficit — that it’s been brought on by shady trade practices involving U.S. international trade partners; specifically China. As Trump looks at launching a formal investigation into how the country’s trade partners utilize subsidies and “dumping” to manipulate trade balances, economists are worried the president could start a trade war. But with his eyes set on two industries in particular, will Trump trade create a jobs boom or hurt the economy by pricing out U.S. exports?
Will Trump Trade Start a Trade War?
In regards to a country’s economy, there isn’t much the country’s leaders won’t do to boost said economy and support its people. But the Trump administration believes certain countries may have crossed a line in what can be described as “fair trade”. The key culprit? China. The Trump administration believes our overseas trade partner is guilty of a practice called “dumping” . Dumping is a term that refers to exporting a product at below the typical market price to undercut other countries.
This isn’t the first time China has been accused of unethical practices. In November, U.S. steelmakers accused Chinese steel companies of shipping steel through Vietnam to secure lower tariff costs.
Thus far, Trump has signed two executive orders instructing the government to look at trade deficits and the reason for them. However, as yet there have been no results. If this executive order is signed, results could come more quickly, with tariffs being placed on Chinese steel and aluminum.
And while some economists warn that the action could lead to a trade war, the truth is that it could actually be a big plus for U.S. steel companies, who would see a boost as a result of a tariff on Chinese imports. This is especially true if Trump can execute on his promise to invest in America’s infrastructure.
So what would happen if the U.S. probe finds China at fault?
The U.S. would raise duties on all Chinese steel. As a result, the influx of Chinese steel in the market would slow to a trickle as supply and demand realign. The cost of steel would rise, and U.S. steelmakers would see not only a boost in sales, but most likely a rise in market share, as well.
Watch this video from Arirang News regarding Trump and China’s meeting:
If Trump signs the executive order, expect the probe to find in favor of U.S. steel companies, and expect shares of those steel companies, such as United States Steel Corp. (X), AK Steel Holding Corp. (AKS), and Nucor Corp. (NUE), to rise.
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