Metal stocks slide up to 5% as Donald Trump imposes 10% tariffs on China | Stock Market News

Indian metal stocks faced significant selling pressure in trade on Monday, February 3, as the global trade war officially escalated after US President Donald Trump announced sweeping tariffs on trading partners, including China.

The Nifty Metal index tumbled 3.6% in intraday trade, hitting the day’s low of 8,000. All fifteen index constituents traded in the red, with SAIL, JSW Steel, Hindustan Copper, and National Aluminium leading the losers’ list, with losses ranging from 2% to 5.4%.

The Trump administration, on Saturday, announced a 25% tariff on goods from Canada and Mexico. Additionally, goods from China, which already face various duties, will see an extra 10% tariff starting Tuesday. This move aims to address what Trump calls a national emergency due to fentanyl and illegal immigration pouring into the United States.

Mexico and Canada, the top two U.S. trading partners, immediately vowed retaliatory tariffs. Ottawa unveiled a 25% counter-tariff on U.S. goods, Mexico pledged similar actions, and Beijing issued a statement vowing “corresponding countermeasures.”

The Trump administration has regularly warned Canada that any retaliatory tariffs would prompt the U.S. to escalate its own measures, raising the prospect of a spiraling trade war, according to an official familiar with the situation.

Trump has repeatedly expressed his fondness for tariffs and signaled that Saturday’s action could be the first in a series of further trade conflicts. By imposing the tariffs, Trump has officially launched a global trade war, which experts say could lead to global supply disruptions and potentially spur inflation.

A global trade war may spur inflation, keep interest rates higher for longer, and be a headwind for global growth and metals demand. It could also lead to nations restricting exports of critical minerals.

Apart from China, Trump is reportedly set to announce tariffs on European imports this week. He also threatened a 100% tariff hike on BRICS nations, including India, stating that member countries would face such tariffs if they continued their de-dollarization effort.

Tariff tensions trigger slide in base metal prices

The tariff announcement triggered a slump in base metal prices on the London Metal Exchange in today’s trade. Three-month copper on the London Metal Exchange (LME) slid 1.3% to 8,927.5 a metric ton, and LME aluminum eased 1.5% to $2,556, falling to its lowest in more than two weeks.

Nickel fell 0.5% to $15,130, and LME zinc shed 1% to $2,713.5. China accounts for approximately 50% of the global output of base metals, as the country’s economy heavily depends on the property sector, which faced significant challenges after COVID-19.

The world’s second-largest economy has implemented several monetary and fiscal measures, including interest rate cuts and the unification of minimum down payments for home loans, aimed at revitalizing the property market, resulting in a rebound in the Chinese economy in 2024.

Following the imposition of new tariffs by the US, experts believe China should prioritise additional stimulus measures to support its economic engine. During his first term, the Trump administration imposed significant tariffs on Beijing, citing trade imbalances. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.