Shares of steel producer Cleveland-Cliffs (CLF 2.48%) were moving higher today as steel stocks jumped broadly after President Trump said on Sunday that he would impose 25% tariffs on all steel and aluminum imports to the U.S.
The news was seen as a positive for U.S. steel producers like Cleveland-Cliffs as it should lead to less competition and higher prices.
As of 9:45 a.m. ET, the stock was up 14.1% on the news.
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The trade war heats up
Economists and investors are generally against trade wars and tariffs, but there are some beneficiaries of import taxes such as domestic commodity producers like Cleveland-Cliffs.
Cleveland-Cliffs is a fully integrated steel producer as it mines iron ore in Minnesota and Michigan, and makes a wide range of steel products so tariffs would be protective for the company.
It's unclear when the tariffs will go into effect as Trump announced the new policy to reporters on Air Force One on Sunday. Other steel and aluminum stocks including Nucor, Alcoa, and U.S. Steel also rose on the news.
Cleveland-Cliffs CEO Lourenco Goncalves has been an outspoken supporter of tariffs, saying they can make a "long-term positive impact" in making "America a manufacturing superpower once again."
NYSE: CLF
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What's next for Cleveland-Cliffs
Goncalves has also been aiming to acquire U.S. Steel, which was recently blocked from being bought by Nippon Steel. According to media reports, Cleveland-Cliffs has discussed partnering with Nucor to acquire the struggling U.S. Steel.
The news of import tariffs would make U.S. Steel more expensive but also gives Cleveland-Cliffs more flexibility to raise cash through an equity offering or to make a stock-based deal to acquire U.S. Steel.
Tariff policy can change quickly so investors shouldn't assume the 25% duties are here to stay, but the news is clearly a positive for Cleveland-Cliffs. It's not a surprise to see the steel stock gaining today.
