“No nation was ever ruined by trade.” (Benjamin Franklin); “Trade wars are good and easy to win.” (Donald Trump); “Canadian steel is as big a threat to the national security of the United States as American maple syrup is to the national security of Canada.” (Anonymous).
Outrageous and outlandish (let alone—what else?—‘trumped up’) are the operative words to describe many comments issued these days by and at the White House. Facts often go missing in action.
So when US President Donald Trump’s administration extended its steel and aluminum tariffs to imports from Canada, Mexico and the European Union on June 1, it predictably unleashed torrents of equally outrageous and outlandish reaction.
That sent the editors at The MoneyLetter  off looking for the salient facts and, more importantly, the stocks that might become silk purses from this sow’s ear.
The facts on steel and aluminum
■ Canada exports 80 per cent of the steel it makes to the US; this accounts for 16.1 per cent of that country’s imports.
■ Canada is the largest supplier of aluminum to the US, with a total export value of close to $5.6 billion US, according to the US Department of Commerce. Ninety per cent of that aluminum is produced in Quebec.
■ The impact of tariffs is likely to be limited. The steel and aluminum industries account for just 0.5 per cent of Canada’s GDP, and economic analyses show the tariffs would trigger a GDP reduction of only 0.2-0.3 per cent.
■ The steel and aluminum industries in Canada employ 23,000 people. About 15 per cent of those jobs may be lost, as well as several thousand in other industries that supply products and services to steel and aluminum. (Estimates of US jobs that will be lost because of the tariff range up to 200,000 to 400,00).
According to many analysts, companies in the industry are concerned less about tariffs than they are about the possibility that the promised $1.5 trillion spend on infrastructure may not materialize. Only $200 billion has been committed so far, and as one steel executive has said: “The tap has barely been turned on. If we don’t see at least another $500 billion in infrastructure spending in the next year, we will be in trouble. We’re really counting on it.”
Before we highlight stocks that could perform well despite the tariffs, it is worthwhile noting that this is not the first time a US president got tough on imported steel. In an attempt to revive the industry, George W. Bush imposed tariffs in 2002 (Canada was exempt). “This relief will help steelworkers, communities that depend on steel, and the steel industry adjust without harming our economy,” said Bush.
Really? Approximately 200,000 jobs were lost. Business and consumers paid more for goods made of steel. Forty-nine per cent of steel-consuming firms reported some difficulty obtaining steel. Just one year later, Bush threw up his hands and reversed the tariffs. Maybe, just maybe, Trump’s bluster will turn out to be, like Bush’s, much ado about nothing.
Steel stocks worth a look
A high flier has never emerged from the ranks of Canadian and American steel companies. Steel stocks are stable and plodding—and usually dependable. Even in a time of relative turmoil, like these days, analysts have found some that investors might like.
Russel Metals (TSX—RUS)
Russel Metals is a Canadian metals distribution company, primarily focused on steel distribution. The company’s metals service division operates 65 centres across Canada, while its energy division produces pipes for the energy industry. If you think that Russel has nothing to worry about from the tariffs, you’re absolutely right. “The impact for us can be nothing but positive because higher steel prices are good for us,” says Marion Britton, the company’s CFO. But the best reason is that Russel does not ship any of its products to the US. And like most steel companies, which lost from 2-5 per cent of their market cap on the day Trump announced the tariff, Russel has rebounded and now trades just 60 cents below its price on June 1.
Tree Island Steel (TSX—TSL)
Richmond, BC-based Tree Island Steel has a tiny market cap of $72 million. But the company has been in business since 1964 and has four operating facilities in Canada and the US. Tree Island makes steel wire and other fabricated wire products. It uses zinc and carbon steel rods to make products in eight categories for use in the industrial, residential, commercial and agricultural markets. It operates under five different brands to sell different product categories to consumers. Tree Island too has almost recovered fully from its price on the day tariffs were announced.
Nucor is one of North America’s largest steel producers, manufacturing 27 million tons of finished steel at 23 mini-mills across the United States. Investors like the fact that the company has always kept a conservative balance sheet. Analysts say that Nucor is poised for steady growth over the next two years, though they quickly add that growth is dependent on the promised and highly anticipated massive infrastructure spend. The company yields a solid 2.37 per cent dividend.
United States Steel (NYSE—X)
Old and venerable United States Steel produces and sells flat rolled and tubular steel products in North America and Europe. The company is active in three markets—flat rolled products in auto and consumer sectors; tubular products and welded steel casing and tubing for customers in oil and gas and petrochemical; and thirdly, US Steel Europe customers in construction, conversion, container and transportation markets.
“The thing about these tariffs,” says one observer, “is that there’s so much opposition to them. It’s not like softwood lumber, where Canada fights alone.” So, Much Ado About Nothing? We shall see.
This is an edited version of an article that was originally published for subscribers in the June 2018/Second Report of The MoneyLetter . You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter. 
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