The VanEck Vectors Steel ETF (NYSEArca: SLX) was boosted Tuesday on reports that the Trump Administration could pursue additional tariffs on Chinese steel imports.
SLX, the only exchange traded fund dedicated to steel stocks, was one of the best-performing ETFs during the 2016 presidential election year as President Trump promised massive infrastructure spending while sounding a protectionist tone that some market observers viewed as potentially beneficial to American steelmakers.
SLX tries to reflect the performance of the NYSE Arca Steel Index, which follows global companies involved in the steel industry. Part of the problem are expectations that the Trump Administration will push off its ambitious infrastructure effort until next year.
Investors will have to keep a close watch over China, the largest producer of steel, which made up half of the 1.6 billion metric tons produced last year. Beijing has cut back production after the international community accused Chinese producers of dumping excess products on the global market.
“The Department of Commerce is expected this week to announce findings from its Section 232 investigation into whether foreign-made steel imports threaten U.S. security. President Donald Trump signed a memorandum in late April asking Commerce Secretary Wilbur Ross to prioritize the probe, which could result in higher tariffs for Chinese and other foreign steel firms, to the benefit of the U.S. steel industry,” reports CNBC.
Related: What Trump’s Tax Plan Means for Income Investments
Earlier this “President Trump opened an investigation under Section 232 of the Trade Expansion Act of 1962 that could allow the president to impose restrictions on imports if imports threaten to impair national security. Current curbs on steel imports relate to unfair trade complaints filed with the World Trade Organization. The Defense Department reportedly consumes less than 0.3% of the US steel industry’s annual output by weight,” said Fitch Ratings in a note.
The $137 million SLX holds 24 stocks. The U.S. accounts for almost 38% of the ETF’s weight while Brazil and the Netherlands combine for 38%.
“On Tuesday, three senior administration officials told Reuters that Trump is impatient with China and is looking at a range of options, including tariffs on steel imports. Similarly, Axios reported Tuesday that the West Wing is discussing penalties for preventing or punishing foreign firms for selling large quantities of steel in the U.S. at prices far below the market,” according to CNBC.
For more information on the steel industry, visit our steel category.