Markets are uncertain about further actions of the new US administration regarding trade policy. The broad market index S&P500 is consolidating in a narrow range.
US President Donald Trump said on Sunday he would impose new 25% duties on all steel and aluminum imports into the States, in addition to existing duties on metals. He also said he would announce reciprocal duties by midweek.
According to government and American Iron and Steel Institute data, the largest sources of US steel imports are Canada, Brazil and Mexico, followed by South Korea and Vietnam.
Hydropower-rich Canada is the largest supplier of primary aluminum to the US, accounting for 79% of total imports. The Canadian steel and aluminum industry supports key American industries such as defense, shipbuilding and automotive.
It is likely that some American producers will have to face higher costs because of these 25% duties. Import dependence is high: about 40–45% for aluminum and 12–15% for steel.
During his first term, Trump also imposed 25% duties on steel and 10% on aluminum, but later granted duty-free quotas to several trading partners, including Canada, Mexico and Brazil.
The new US president has long complained that the EU's 10% duties on auto imports are much higher than the 2.5% rate in the US. According to the World Trade Organization, the weighted average tariff rate in the States is about 2.2%, compared with 12% for India, 6.7% for Brazil, 5.1% for Vietnam and 2.7% for the EU.
If the actual measures of the US administration are implemented as stated, it will limit production activity and economic growth in the short term, negatively affecting stock market capitalization and putting downward pressure on the S&P 500 index.
The overall recommendation is to sell the S&P 500 under the condition that the imposed tariffs will be in line with the stated parameters.
Profits should be taken at the level of 5,960. A Stop-loss could be set at the level of 6,100.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop-loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
