MENU

Why the Trump Tariff is really a red-herring for ASX investors

The pressure on raw material stocks is unlikely to abate today even as the US stock market staged a comeback in overnight trade and as US President Donald Trump gave his strongest hint yet that Australia could be exempt from his tariffs.

President Trump said Mexico and Canada will be initially exempted from the 25% tariff on imported steel and 10% on aluminium when his protectionist policy kicks in. He also said other countries with close trade and military ties, like Australia, could also be exempt.

This puts BlueScope Steel Limited (ASX: BSL) in a sweet spot but don’t expect the rest of the sector to rally on the news as Chinese steel and iron ore futures tumbled yesterday with Beijing affirming that it stands ready to retaliate against the Trump tariffs.

But you probably can’t blame Trump for the slump in steel and iron ore prices in China – not this time. China actually exports very little steel to the US and only accounts for 2.9% of the material imported to the US in 2017.

This is probably why Chinese leaders have been quiet on the Trump tariffs. If anything, the tariffs are a red-herring although Trump’s threat to restrict Chinese investment into the US to punish the country for stealing US intellectual property is a totally different story.

Commodity traders told Reuters that its weak domestic demand that is behind the 3.4% drop in iron ore price overnight to US$75.84 a tonne as the price of the most actively traded rebar contract dropped by a similar amount. They suggested the sell-off may be more to do with seasonal and other factors.

This is good news for our major iron ore miners like Rio Tinto Limited (ASX: RIO), BHP Billiton Limited (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) as it means the price of the commodities could rebound in the short-term.

The price of steel and iron ore has rallied just after last month’s Lunar New Year holiday as Chinese industrial cities extended steel production curbs to combat pollution, but prices have since fallen as domestic demand has been slow to return, according to Reuters.

However, steel demand in construction usually ramps up from late March to mid-May as the weather becomes ideal for construction work.

What this means is that any dip in iron ore stocks could prove to be an attractive buying opportunity – this is assuming a full blow global trade war doesn’t erupt in the meantime.

But given Trump’s softening stand on his initial all-encompassing iron-clad tariffs, there is hope that this economic Armageddon scenario will be avoided.

Don’t let any market weakness go to waste! The experts at the Motley Fool have nominated their three best blue-chip stocks for 2018 that are worth looking, particularly if their prices fall in sympathy with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO).

Click on the free link below to find out what these stocks are and why they should be on your watchlist.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!