Shares of the VanEck Vectors Steel ETF (NYSEArca: SLX) tumbled Thursday after the White House unveiled a diluted version of its original tariff plan, which previously sparked domestic steelmakers higher.
“The U.S. will ‘pause the imposition’ of steel and aluminum tariffs that take effect Friday for Europe, Australia, South Korea, Argentina and Brazil, U.S. Trade Representative Robert Lighthizer told the Senate Finance Committee on Thursday,” reports Bloomberg.
SLX tries to reflect the performance of the NYSE Arca Steel Index, which follows global companies involved in the steel industry. While more than a third of SLX’s lineup is allocated to U.S. steel producers, the ETF has a heavily global tilt, including exposure to ex-US developed markets and emerging markets steel companies.
Watered Down Tariffs on Steel, Aluminium
The U.S. Commerce Department has recommended curbs on steel and aluminum imports from China, which has been accused of dumping on the global markets, and other countries. Trump said he wants to place a 24% tariff on steel imports, the harshest outcome of three options presented to him, along with a 10% duty on all aluminum entering the U.S.
However, the initial tariff effort was met with hostility from U.S. trading partners, causing some market observers to speculate that a trade war could result from the Trump Administration’s efforts to protect U.S. steelmakers.
“Trump announced earlier this month he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum but exempted Canada and Mexico as long as they agreed to an updated North American Free Trade Agreement,” according to Bloomberg. “He also left the door open for allies to negotiate their own exemptions, sparking a furious lobbying effort by trading partners like the European Union, which is threatening retaliation if it’s hit by the duties.”
The SPDR Metals & Mining ETF (NYSEArca: XME) also plunged on Thursday. XME tries to reflect the performance of the S&P Metals & Mining Select Industry Index, which is designed to track the metals and mining segment of the S&P Total Market Index, a broad U.S. equity market index. However, unlike the traditional cap-weighted indexing methodology, XME follows a more equally weighted approach.
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