Metal stocks turn lacklustre as market braces for Trump's 25% tariffs on steel and aluminium imports

The Nifty Metal index has already corrected over 3 percent in the year-to-date period.

Shares of metal companies witnessed slight recovery as the market priced in the slew of latest tariff impositions by US president Donald Trump in the selloff seen in the last session. After teasing to impose tariffs on steel and aluminium imports in the US over the weekend, Trump officially signed the executive order last night.

The move raised the tariff rate on aluminium imports from 10 percent to 25 percent, and also reinstated a 25 percent tariff on millions of tons of steel imports. These latest tariffs mark a step ahead into escalating trade tensions, increasing the risks of retaliatory tariffs by other nations, heightening fears of a full-blown multi-front trade war.

Concerns over Trump's tariffs had weighed down heavily on metal manufactures in the last session, making Nifty Metal one of the worst performing sectoral indices. The Nifty Metal index had ended nearly 3 percent lower at 8,359.25 in the last session. All constituents of the sector had closed in the red, with names like NMDC, Steel Authority of India, JSPL, Tata Steel, NALCO, Vedanta and JSW Steel tanking 3-5 percent.

However, instead of a negative reaction to the official signing of executive orders, metal stocks did not see sharp selling pressure today. Names like NALCO, Hindalco, JSW Steel and JSPL glimmered in the green, however, the broader Nifty Metal index did pare opening gains to trade flat.

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Analysts had also pointed towards the possibility of a muted reaction to tariffs from the metal pack, more so since the sector also sailed through a wave of selling in the anticipation of these tariffs.

In a similar move, global markets also largely shrugged off the news, with Wall Street closing higher overnight and most Asian markets inching up in early trade. Analysts attribute this muted response to ‘tariff fatigue’ among investors, suggesting that markets may have already priced in the impact of Trump's protectionist measures.

Trump's tariffs on aluminum and steel create major headwinds for global metal companies by raising the cost of exports to the US, making foreign metals less competitive and dampening demand. The higher export costs also put pressure on profit margins for metal producers.

Furthermore, restricted access to the US market could lead to excess supply in global markets, driving down prices and further eroding profitability. These concerns have triggered a selloff in metal stocks, as investors brace for potential revenue and earnings setbacks across the sector.