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Why Did AK Steel Stock Drop 7%?

By Rich Smith - May 13, 2019 at 5:26PM

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No one ever promised the stock market would make sense.

What happened

Shares of Ohioan steelmaker AK Steel (AKS) closed 7% lower on Monday -- a strange move in the stock, considering the news we've been seeing of late.

Last week, the Trump administration made good on its threat to raise tariffs on $200 billion worth of various imported Chinese goods to 25%. The new tariffs would appear not to include steel -- on which tariffs have already been raised. Still, the longer this overall trade war continues, the longer steel companies like AK Steel can expect to benefit from lessened competition from Chinese steel imports.

Molten steel pouring in a foundry

Image source: Getty Images.

So what

This makes investors' decision to sell off AK Steel stock on news of a continuing trade war seem pretty strange. Steel prices  are said to be at "multi-month highs right now, and possibly headed even higher." Over the weekend, the World Steel Association  predicted a 1.3% increase in global steel demand this year, followed by continued demand growth in 2020.

Now what

On the other hand, even if these tariffs appear to be good news for U.S. steelmakers at first glance, if an expanding trade war ends up derailing the global economy, that could be bad news for all companies -- steelmakers included.

When you get right down to it, maybe this is the reason that not just AK Steel, but U.S. Steel and Nucor stocks, are down today as well.

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