The recent escalation of trade tensions between the U.S. and Canada has seen the U.S. impose 50% tariffs on approximately $20 billion worth of Canadian imports, including steel. Canada retaliated with equal trade measures, targeting over 700 U.S. goods, including steel, dairy, seafood, appliances, wood, and paper products, with tariffs ranging from 15% to 50%. The Canadian counter-tariffs specifically increased the tariff on U.S. steel from 25% to 50%, effective September 8, 2026.
Initially, the news of the trade war led to a surge in metals and materials stocks. Companies like Nucor, Steel Dynamics, Cleveland-Cliffs, and Century Aluminum saw their shares rise. The VanEck Steel ETF (SLX) increased by 1.6% on the Monday following the breakdown in trade talks, and the State Street Materials Select Sector SPDR (XLB) hit an intraday all-time high. This initial rally, however, was short-lived, with XLB ending the week in negative territory and SLX nearly flat. Despite this, both ETFs have performed well year-to-date, with SLX up over 28% and XLB up over 18% as of August 28, 2026.
Analysts have offered mixed perspectives on the long-term impact of these tariffs. Atsi Sheth of Moody's Ratings emphasized the ongoing uncertainty. While some believe U.S. steel companies might benefit due to the larger domestic market, Angelo Kourkafas of Edward Jones noted that higher steel and aluminum costs would also create headwinds for U.S. manufacturers, including the auto and construction sectors. Scott Beaulier of the University of Wyoming distinguished between stock beneficiaries and business beneficiaries, suggesting that durable winners would be firms with domestic capacity, secure raw material inputs, and customers unable to easily substitute away.
Supply chain complexities are a major factor in determining who wins and loses. Dan Luttner of NEOS by Argon & Company highlighted that the initial stock price jumps for companies like Nucor and Cleveland-Cliffs were a "headline reflex" as mills repriced. He pointed out that companies controlling their feedstock internally, like Nucor and Cleveland-Cliffs with their electric arc furnaces, are better positioned. However, the situation for Century Aluminum is more complicated due to reliance on cross-border alumina or semi-finished products. Luttner also stressed that tariffs compound every time a metal re-crosses the border in complex North American supply chains, particularly in sectors like automotive.
