New Tariffs May Bring Liberation to These 3 Steel Stocks

Key Points

• As new trade tariffs hit the United States and most of its trading partners, these steelmaking stocks might come as a potential rescue for investor portfolios.
• Backed by fundamental factors in the new economic regime, these companies have successfully attracted new institutional buyers.
• Wall Street analysts corroborate the optimism through their bullish outlooks and valuations in these companies.

Everyone is in shock at the sharpest drop in the S&P 500 index recently, bringing back prices not seen since September 2024. The recent volatility breakouts are a function of President Trump's recent trade tariffs, which took effect at the start of April 2025 on most of the biggest trade partners with the United States economy. That being said, chaos in one market area typically creates opportunities in another, and there is a big one today.

The main purpose, or goal, behind these tariffs is to incentivize companies within the United States and abroad to start manufacturing their products domestically, an incentive that has already created new investment rounds from semiconductor makers and others. The common ground in these developments is simple: these companies will all need to build the necessary factories to satisfy demand and capacity requirements.

This is where steelmakers come into play. From the automotive sector to the overall industrial space, stocks like Cleveland-Cliffs Inc. NYSE: CLF, United States Steel Co. NYSE: X, and Steel Dynamics Inc. NASDAQ: STLD all stand front and center to deliver investors new potential upside for the coming months. With the fundamental image laid out for the industry, it is time to get into the details of what makes these stocks a good pick today.

Massive Risk-to-Reward Benefits for Cleveland-Cliffs Stock

One of the United States’ main steel manufacturers should never trade as low as it does today. Shares of Cleveland-Cliffs stock have now fallen to a significant low of only 35% of their 52-week high level. That being said, the market’s reasoning for selling the stock by this much can, of course, be based on the recent trade tariff announcements.

However, that doesn’t mean that this reason justifies such a big sell-off today, and that is something that investors should keep in mind moving forward. Just like institutional buyers from Dimensional Fund Advisors decided to take advantage of as of February 2025, when they decided to boost their holdings in Cleveland-Cliffs stock by 3.1% frontrunning tariffs.

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That allocation brought the group’s net position to a high of $199.7 million today, or 4.3% ownership in the company, giving investors a new sign of confidence in the company’s future potential. Now, there is a fundamental factor that can quantify the upside present in this company today, and it all relies on earnings per share (EPS).

Wall Street analysts now forecast up to $0.06 in EPS for the third quarter of 2025, a significant boost from today’s reported loss of $0.68 per share. Considering that stock price action is typically driven by underlying EPS growth rates, investors can see where the driver is for this company to break through a new ceiling.

Price Action Shows the Way in United States Steel

Zooming out to the past quarter, investors can notice one very strong factor aiding in the future momentum of United States Steel stock. This company has outperformed the broader S&P 500 by as much as 32%, a run that might start to draw in further momentum buyers and value investors who realize there is an obvious preference for this name.

So far into this new quarter, which is basically April 2025, up to $8.8 million worth of institutional capital has made its way into United States Steel stock, on top of the $605 million purchased in the previous quarter. This is another sign, like Cleveland-Cliffs, of these domestic steelmakers being called upon to answer the new demand themes for various industries.

Investors can also look to the recent manufacturing PMI report, which shows rising new order demand for primary metals like steel and aluminum. If this momentum turns into a sustained trend, these stocks could deliver meaningful upside for portfolios.

Short Sellers Have Had Enough of Steel Dynamics Stock

Now that the juice is not worth the squeeze in Steel Dynamics stock, whose shares have fallen to a low of 75% of their 52-week highs, investors can see short sellers headed for the doors and collapsing the company’s short interest by as much as 19.2% over the past month alone.

This coverage in short positions only opens the door for more buying to take place in Steel Dynamics stock, and that is something that investors can see happening already, similar to other names in this space. Over the past quarter, up to $1.1 billion of institutional capital went into Steel Dynamics, and an additional $3.5 million for the new quarter already.

Understanding the vital role that this company will play in the transition to domestic production as a result of these new tariffs, Wall Street analysts have kept a consensus price target of up to $149.7 per share on Steel Dynamics stock, implying a net upside of as much as 29% from where it trades today.

When the volatility in the S&P 500 subsides, more capital will likely seek the upside and safety that these stocks provide in the new economic regime, favoring the steelmaking industry over most others.