Trade topics are dominating headlines recently. While a certain number of these topics, such as the US relationship with China, might be too opaque for now, investors and analysts can gather interesting intel about the tariffs that are already in place, mainly steel tariffs.
The Trump administration initiated the first round of steel tariffs in early March. After this, a volatile discussion ensued about who can or should be exempt and how other countries will respond. Soon, it was clear that tariffs are going to impact many key global economies. For example:
To understand who will benefit or not from these policies, I use AlphaSense. It’s an efficient way to double-check a macro thesis or to check the micro-level impact on individual companies.
To see a high level trend chart of the number of mentions of “steel tariffs” across global company filings, company presentations, call transcripts, industry reports, etc. I first run a keyword search in AlphaSense for “steel tariffs”.
To refine my results, I’ll narrow by geography because I’m looking exclusively at U.S. based companies.
I’ll also refine by type of filing, since I am primarily interested in conference call transcripts and press releases, which provide a slightly more granular discussion than the regular 10Qs and 10Ks.
While it is clear that steel producers such as U.S. Steel or Timken are going to become beneficiaries (both have voiced positive comments about the tariffs), the rest of the players could face an uncertain future according to several mentions.
The most concerns were voiced by oil & gas companies that use steel in the construction of wells and pipelines. C&J Energy Services was one such example. According to Forbes, one quarter of steel pipe and tube purchased by U.S. companies was imported, meaning the effect could be pronounced.
American Railcar Industries, a large manufacturer of hopper and tank railcars, also mentioned its raw materials costs already went up, and the company is looking to adjust its supply chain. LCI Industries, an RV parts manufacturer, mentioned similar points and a concern about margin pressure.
Interestingly, there could be unforeseen negative impacts as well. A recent example is Brown-Forman, a liquor company (owner of Jack Daniel’s), which mentioned that it is likely to be impacted as Mexico has slapped retaliatory tariffs on American whiskey.
The Federal Reserve Districts also had their say on the tariffs. According to the New York Fed’s Liberty Street Economics blog, it is likely that the policy is going to destroy more jobs than it creates, citing historical examples. Chicago Fed surveyed the business owners of the area, who voiced similar opinions.
In the U.S., steel producers are likely to generate extra profits, however the steel tariffs will likely affect the oil & gas business, because they rely on imported steel. Other industries could also be impacted, because the countries affected by steel tariffs can retaliate. More generally, several companies and institutions have raised doubt about the overall positive effect of the tariffs on the U.S. economy.
Wondering what foreign companies have to say about the tariffs? Stay tuned for Part 2 of this series, a look at reactions outside the United States.