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Section 232 of the Trade Expansion

of 1962 In the United States allows the president to initiate an investigation to determine whether national security is threatened by imports. According to Section 232, this includes the imports causing “substantial unemployment … decrease in government revenue … displacement of any domestic products by excessive imports,” and other adverse effects. In other words, it’s a very broad clause. That gives Trump tremendous flexibility in instituting policy changes to restrict steel imports. That’s huge for steel stocks like X. Following the election of Trump as President, steel stocks such as U.S. Steel rallied hard on expectations for increased infrastructure spending to spark higher steel demand. But that hasn’t really been the case, and X stock is now trading just above its pre-Trump levels. The reason, though, isn’t a lack of demand. Year-to-date, steel demand is up about 4%, underscoring a gradually growing economy with healthy infrastructure spending. Instead, the decline is due to a 14% increase in imports in the same period. In other words, a supply surge has masked steadily increasing demand in the U.S. Remove the catalyst for the supply surge, and the supply-demand dynamics imply much higher steel prices. Section 232 does just that, and considering the flexibility Section 232 gives Trump in instituting policy change, the right move here seems to be long steel stocks
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• capital junior
• 20/07/2017 16:39