Please ensure Javascript is enabled for purposes of website accessibility

How Trump Sent Alcoa Stock Soaring 12.5% in August

By Neha Chamaria – Sep 7, 2020 at 5:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors applauded President Trump's move to protect the U.S. aluminum industry.

What happened

Shares of Alcoa (AA) jumped 12.5% in the month of August, according to data provided by S&P Global Market Intelligence, extending their rally from July. While better-than-expected second-quarter numbers lifted the stock higher in July, President Donald Trump set the aluminum giant's shares on fire last month.

So what

On August 6, Trump delivered a speech at a Whirlpool manufacturing plant. The biggest takeaway from his speech was about tariffs. The President decided to slap tariffs on aluminum imports from Canada barely a year after lifting them.

Trump said he had withdrawn the tariffs in return for a promise that Canada would not flood the U.S. with aluminum and kill jobs, but the Canadian government broke its commitment.

Aluminum ingots.

Image source: Getty Images.

In a proclamation, Trump stressed that imports of non-alloyed, unwrought aluminum, or unprocessed aluminum in the form of ingots, slabs, and blocks with 99% aluminum content, from Canada surged 87% between June 2019 and May 2020 versus the comparable period, and "exceeded the volume of any full calendar year in the previous decade." The proclamation revealed that Canada is the largest exporter of non-alloyed, unwrought aluminum to the U.S.

This surge in imports from Canada, therefore, compelled Trump to reinstate 10% tariffs to defend the aluminum industry in the U.S. and protect its "national industrial base."

Not surprisingly, Alcoa shares rallied on the news, as tariffs make imported aluminum costlier and domestic aluminum more competitive.

Now what

The tariffs have drawn a mixed response from the U.S. aluminum industry. Century Aluminum Company (CENX -2.63%), the largest primary aluminum producer in the U.S., applauded Trump's move.

Alcoa, on the other hand, has been vocal about its dislike for tariffs and believes Trump's move will distort the aluminum industry further. During Alcoa's second-quarter earnings call, management reiterated how it prefers fixing "the root problem," including overcapacity in China.

When all is said and done, there's no denying that Alcoa should also benefit from any tariffs on aluminum imports, which is what investors in the stock are interested in.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alcoa Stock Quote
Century Aluminum Stock Quote
Century Aluminum
$6.49 (-2.63%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.