Steel & Aluminum Import Tariff Threat: 4 ETFs Gaining & Losing In The Market Shake-Up

Author: Chandrima Sanyal | March 12, 2025 05:04pm

When President Trump announced a 50% tariff on Canadian aluminum and steel imports, it created a cloud of fear and uncertainty in the markets.

Stocks dropped as the 25% previously announced tariffs set to be implemented on Wednesday were anticipated to be doubled.

Trump later hinted at reconsideration after Ontario's premier suspended a surcharge on electricity exports. While domestic producers may benefit, higher costs could dent the profits of industries that rely heavily on these materials.

Also Read: Trump Slaps 50% Tariff On Canadian Steel & Aluminum, Threatens Auto Industry

This has presented a good opportunity to look into exchange-traded funds, ETFs, that may gain or lose:

• VanEck Steel ETF (NYSE:SLX): The ETF gained 1.3% on Tuesday. Its U.S. exposure is at 53.78%, with Brazil and Australia following at 14.65% and 10.71%, respectively. SLX has the least exposure to Canada at less than 1%. The ETF carries an expense ratio of 56 basis points. Tariffs on materials imports from Canada bode well for domestic producers. SLX has exposure to United States Steel Corp (NYSE:X) and Steel Dynamics Inc (NASDAQ:STLD).

• iShares U.S. Basic Materials ETF (NYSE:IYM): This fund appeals to investors seeking a conservative way to gain aluminum exposure. The ETF’s exposure is spread out to base metals stocks and other materials sectors like chemicals and forestry products. This makes it a less speculative investment. This reduces risks from an aluminum market downturn. The ETF holds stocks of aluminum leaders such as Alcoa (NYSE:AA) and Reliance Steel & Aluminum (NYSE:RS). Both stand to gain if the tariffs are implemented.

• The Invesco Building & Construction ETF (NYSE:PKB): One of the outcomes of the 50% (or even 25%) tariffs on steel and aluminum imported from Canada is that it will drive up materials prices in the U.S. Higher steel prices may weigh on the construction sector. This fund could face profitability issues as steel is a key raw material in the industry it is exposed to.

• The Invesco Food & Beverage ETF (NYSE:PBJ): This fund could see headwinds as higher aluminum costs may pressure the food and beverage bottling industry as well. Companies like Diageo (NYSE:DEO), Coca-Cola (NYSE:KO), and PepsiCo (NASDAQ:PEP) likely to face increased costs.

U.S. Steel Industry Backs The Move

Despite the market jitters, U.S. steel manufacturers are largely in favor of the tariffs. In a letter to the president, five steel industry executives, represented by American Iron and Steel Institute, expressed their strong support for the 25% tariffs. Moreover, Jesse Gary, the CEO of Century Aluminum (NASDAQ:CENX) told the New York Times, “The new tariffs will close those loopholes back up and enable us to begin investing again, and bring on more production here in the U.S.”

While steel producers in the U.S. are supportive, the aluminum industry has shown a mixed reaction. Alcoa CEO William Oplinger voiced concerns that tariffs could hurt the U.S. aluminum sector due to the company's strong ties to Canadian operations.

The impact of tariffs will likely trickle down to consumers as well. Domestic steel prices have already surged from around $700 to nearly $1,000 per ton since Trump's initial announcement in February. A Bloomberg report said that higher costs could affect a range of products, from aluminum baseball bats to stainless steel cookware and fishing reels.

Investors should keep an eye on ETFs exposed to these sectors, as they may see significant movement in the coming weeks. Whether Trump follows through with the full 50% tariff or retreats from the threat, the ripple effects will be felt across multiple industries and investment tools.

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Image: Midjourney

Posted In: AA CENX DEO IYM KO PBJ PEP PKB RS SLX STLD X