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President Trump unveiled new tariffs, including a 10% increase for all countries starting from April 5, and additional reciprocal tariffs ranging from 10-50% across 185 countries, effective April 9.
However, steel products, which are already subject to a 25% tariff under Section 232, including automobiles and their parts, will not be affected by the new reciprocal tariffs. Canada and Mexico are also exempt from these tariffs, with USMCA-compliant goods continuing to enjoy a 0% tariff.
UBS has indicated that the new "Liberation Day" tariffs are likely to be a net negative for U.S. steel stocks, such as Nucor Corporation (NYSE:NUE) and Steel Dynamics , Inc. (NASDAQ:STLD), which saw a decline of 2-3% after the market closed.
This reaction comes contrary to market and investor expectations that the tariffs would be cumulative, adding the new 10% Liberation tariffs on top of the existing 25% Section 232 tariffs.
The tariffs are also anticipated to have a more severe impact on demand than previously expected, with predictions of GDP growth between 1.5-2% and inflation nearing 5% if the tariffs are not rolled back.
The exemptions granted to Canada and Mexico regarding reciprocal tariffs are seen as a positive in terms of demand, but they also limit the potential for U.S. hot-rolled coil (HRC) price increases. Canadian and Mexican imports accounted for approximately 55% of the 2024 HRC imports into the U.S.
The tariffs are set to remain in place until the concerns regarding trade deficits and nonreciprocal treatment are resolved.
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