Yesterday, the US administration hiked import duties on steel and aluminum to 50%. The move was welcomed by the struggling US steel industry but raised concerns among everybody who makes heavy use of these metals, from car to can producers. Steel tariffs are especially important for Trump and his political base, a symbol of once iconic US manufacturing that has been going through hard times ever since.
The surge in tariffs is not likely to hit American wallets right away, but experts believe that higher prices in construction, machinery, appliances, and other metal-intensive industries are almost inevitable because of higher duties. Although tariffs could protect jobs in steel industry, they could also hurt employment in larger sectors. However, the US administration called import duties crucial to the economy and national security.
“Domestic steel and aluminum production is imperative for our defense-industrial base,” White House representative Kush Desai said in a statement to CNN. “The Trump administration is committed to reshoring manufacturing that’s critical for our national and economic security.”
The Aluminum Association claimed it was concerned that the broad universal tariff could hurt the American economy more than help it, as tariffs cut off raw aluminum supplies from Canada, which many US finishing plants depend on. These plants account for most of the jobs in the local aluminum industry. Experts also warn that more jobs are at risk at companies that use steel and aluminum than would be protected by the tariffs.
Studies of previous tariff policies found that for every job saved in the steel industry, 75 jobs were lost elsewhere due to higher input costs. The previously imposed 25% duty on all imported aluminum could cost 100,000 American jobs.
The stock market seems to not have fully priced in yesterday's tariff announcement, and as more negative forecasts come in, this will result in the downward momentum in the broad market, including the S&P 500 Index.
The overall recommendation is to sell SPX.
Profits should be taken at the level of 5,945.0. A Stop loss could be set at the level of 5,990.0.
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.
