Steel Stocks: 1 Steel Stock to Buy and 1 to Sell on Trump Tariffs

Key Points

• The steel industry has been weak in 2024 but may see improved volumes in 2025 as Trump takes office and proposes protectionist policies, including tariffs.
• President Biden blocked Nippon Steel’s $14.9 billion offer to acquire United States Steel, leaving the company in trouble with its aging and costly infrastructure without the $2.7 billion cash injection to modernize facilities from Nippon.
• Steel Dynamics lowered Q4 2024 guidance but forecasts a pickup in demand in the second half of 2025.

As the Trump administration takes over in 2025, his proposed import tariffs across the board have stoked inflation fears. Many stocks are feeling the impact of stockpiling ahead of the new tariffs, while other stocks are sinking on the prospects of rising costs, leading to softening demand and compressed margins. The basic materials sector is bracing for a potential surge in steel prices. This would mean a 60% tariff on U.S. imports of Chinese-origin steel.

This may have a minimal effect since China has a fractional market share in U.S. steel imports. However, the goal is to drive more business to the nation’s steel producers. While this seems like a boon to domestic steel makers, Trump’s “Made in America” stance could also further hurt one particular steel stock. Here is 1 steel stock to buy and 1 to sell on Trump’s tariffs.

US Steel: Nippon’s Takeover Offer Likely Gets Crushed

Nippon Steel had won the bidding war for United States Steel Co. NYSE: X for $55.00 in cash, totaling $14.9 billion and a 40% premium over its December 15, 2023, closing price. It beat out domestic producer Cleveland Cliffs Inc. NYSE: CLF. Nippon Steel pledged to protect the jobs of current US Steel employees and invest an additional $2.7 billion in its facilities. By April 2024, shareholders unanimously approved the deal.

However, the Committee on Foreign Investment in the United States (CFIUS) remained deadlocked on the transaction through its December 23, 2025, deadline. This led to the triggering of a 15-day window for President Biden to issue a decision. On January 3, 2025, Biden blocked the deal, citing national security concerns. Both Nippon and US Steel were opposed to the blocking and stated they would continue to pursue the deal. The companies stated politics corrupted the review process and pre-determined.

President Trump and the Steelworkers Union Both Oppose the Deal

If the companies were expecting any sympathy or consideration from incoming President Trump, they’re out of luck. Trump has stated early on that he opposed the deal. The Steelworkers Union has also opposed it. Steelworkers president David McCall has called Nippon Steel a serial trade cheater, commenting, "Allowing it to purchase U.S. Steel would have offered it the opportunity to further destabilize our trade system from within and, in the process, compromise our ability to meet our own national security and critical infrastructure needs.” With fundamentals in trouble during a market slump, investors may want to sell this holding.

The Fallout of a Blocked Deal

US Steel not only wants the deal, but needs the deal to close for the sake of its future. US Steel has an aging infrastructure relying on costly and inefficient blast furnace technology, which also faces environmental scrutiny. It would have used Nippon’s capital injection to modernize its facilities. It had already warned that failing a cash injection that would come from the deal, it would shift production away from its outdated blast furnaces to non-union economical electric arc furnaces and move its headquarters out of Pittsburgh. US Steel has been losing market share and facing rising costs with its large unionized labor force.

Steel Dynamics: A Domestic Winner with a Fortress Balance Sheet

While 2024 was a tough year for Fort Wayne, Indiana-based Steel Dynamics Inc. NASDAQ: STLD, the company has a solid balance sheet with low debt to be able to weather the macro climate. President Trump’s protectionist policies should help boost business for the company. However, forecasts were lowered in December as prospects for a weaker global market in 2025 persist. Finnish steel maker Outokumpu had warned that the oversupplied European market was worsening as demand weakness along with extended site maintenance would take a toll on its earnings.

Placing the Bar Low Now, But Light Appears at the End of the Tunnel

On December 16, 2024, Steel Dynamics also guided down their Q4 2024 guidance. The company expects Q4 EPS of $1.26 to $1.30 versus $1.63 consensus estimates. Profits are expected to be meaningfully lower than Q3 due to the lower average realized pricing, seasonably lower shipments, and unplanned outage at its Butler Flat Roll Division, which further reduced shipping by 50,000 tons. However, customers have been positive regarding the business outlook for 2025.

The order backlog is extending deep into the first half of 2025 as interest rates decline and support for the U.S. infrastructure program and onshoring are expected to make a positive impact on demand for steel joists, deck products, flat-rolled, and long-product steel. The company anticipates improved volumes in the second half of 2025 and has repurchased $250 million of stock. Bullish investors may view this stock as a value play.