More than six months after the Trump administration imposed a 25 percent import tax on foreign steel, American steelmakers—the companies that should be the prime beneficiaries of the tariffs—don't seem to be winning.
Nucor, one of the largest steel manufacturers based in the U.S., has seen its stock value fall by more than 16 percent since August 1, economist Mark Perry points out. That decline has wiped out more than $3.5 billion from the company's market value, and Nucor executives told investors last week to brace for more bad news in the coming months. Meanwhile, the stock price for AK Steel Holding Corporation, an Ohio-based steelmaker, has fallen by 26 percent since August. The company's stock is now sitting near its lowest price since May 2016.
How is this possible? The steel tariffs were intended to prop up domestic steelmakers by raising the price of imported steel. Indeed, American steelmakers like Nucor were strong advocates for the tariffs and appear to have exercised significant influence over their implementation. Prices have certainly shot upward since the tariffs were announced in March, but those higher prices may be depressing demand for American steel—and general market uncertainty over the growing U.S.–China trade war could be harming steelmakers too.
"The steel stocks have been slaughtered since the tariffs went into effect," CNBC's Jim Cramer, the exuberant host of Mad Money, said on his show last week. Kramer actually apologized to his viewers for having recommended Nucor stock several months ago—assuming, as many observers did, that the tariffs would protect American steelmakers from competition and allow them to earn more. That hasn't happened because of the tariffs' unintended consequences, Kramer concluded.
"The bottom line is that even the supposed winners from tariffs aren't winning here," he said. "This is simply the wrong time in the business cycle to own a steelmaker."
President Donald Trump still seems to believe the tariffs are working, despite mounting evidence to the contrary. But no matter how many times the president brags about nonexistent new steel plants opening up, the stock market isn't lying.
Now Nucor is telling investors to prepare for the slide to continue. In a press release last week, the company said it expects earnings to decrease in 2018's fourth quarter.
Because tariffs artificially increase the cost of imported goods, the main losers from the administration's steel tariffs have been steel-consuming industries—everything from automakers (such as Ford) and manufacturers of heavy machinery (such as Caterpillar) to small companies that make beer kegs, nails, and industrial parts. Trump pitched his tariffs as a way to protect blue-collar jobs in the United States, but the decision to slap import taxes on steel was effectively a promise to protect the interests of steelmakers at the expense of thousands of other industries.
If the tariffs aren't even helping the steelmakers, surely there is no reason to continue hurting the rest.
"If this is the Protectionist-in-Chief's idea of winning," asks Perry, "what exactly would losing look like?"