Amid signs that Donald Trump is about to implement tariffs on steel imports there is growing relief as well as growing anger about the future. Those who voted Donald Trump into office did so on a US comes first ticket, while those who voted against the controversial president will be up in arms about a potential attack on the free market. So, what can we expect in the future?
Steel tariffs equals protectionism?
The last time that tariffs were placed on imported steel was back in 2002 under the then president George Bush. At the time markets responded negatively to this move but already, even before confirmation, there has been a positive response this time round. One particular stock which is under the spotlight is AK Steel and we await with anticipation the next move from the Trump administration.
For those who are critical of the president’s protectionist stance it is worth noting that Korean steel imports were calculated to be priced at 24.92% below fair value. The import of cheap steel from countries such as Korea has decimated not only the US steel industry but also those in other countries such as the UK. Are tariffs a sensible response?
Significant changes ahead
While the rumoured move towards steel tariffs is described as the biggest event in the industry for more than 20 years, it could be the start of something much bigger (more protectionism?). There are many areas of the US business arena which have been struggling to compete with cheap imports which impact the employment market, rates of pay and ultimately profitability. Donald Trump always said during his presidential campaign that the US would come first, business red tape would be burnt and he would increase the number of US citizens in employment.
This is perhaps the most significant move by Donald Trump during his presidency to date. It has been expected for the last couple of months but to see the implementation of tariffs edge ever closer will also help the president’s much tarnished image. He is fighting for US businesses, he is fighting for the US economy and these tariffs will make those who import cheap steel think again.
Stock markets
There has been initial support for the likes of AK Steel ahead of the official announcement which has been all but leaked in detail. It will be interesting to see how investors react over the coming weeks and months as other areas of the US business arena come under focus. It seems almost inevitable that we will see the introduction of yet more tariffs in due course, something which historically stock markets have been against. As we touched on above, when President George Bush last introduced steel tariffs back in 2002 there was a negative reaction from the stock market. The reaction today has been very positive which perhaps illustrates the changing environment we live in today?
Starting to deliver
Whether the introduction of steel tariffs will take away some of the heat from Donald Trump and his family (and their alleged liaisons with Russian officials) remains to be seen. It is a big move, it is controversial but ultimately it will help the US steel industry which should then filter down into the economy, employment market and ultimately a greater tax take. What else does the president have up his sleeve in the short term? More protectionism?