The U.S. election results have sent shockwaves through the global commodity markets, sparking immediate reactions from analysts and investors. JPMorgan Chase & Co. analysts believe that Donald Trump’s return to the White House could significantly alter the commodity landscape.
Bill Peterson, the bank’s equity research analyst, highlights Trump’s historical penchant for deregulation and tariffs. He predicts that this approach could boost domestic support for the U.S. steel industry, potentially leading to a surge in steel prices. Peterson suggests that increased tariffs on Chinese and Mexican steel could propel steel equities higher.
However, the impact on other metals, particularly those closely linked to the Chinese market, could be negative. Copper, for example, may face downward pressure due to heightened trade tensions between the U.S. and China.
The news of Trump’s victory has already had tangible effects. United States Steel Corporation’s stock price closed the day up over 8%. Concerns about tariffs are particularly high in Canada, where the Toronto Stock Exchange’s commodity-heavy market is sensitive to U.S. economic policy.
The Toronto Stock Exchange’s materials sector has already felt the impact, with GreenFirst Forest Products closing Wednesday down 3.40%.
The U.S. dollar, which typically exhibits an inverse correlation to commodity prices, has also been impacted by the election results. Douglas Porter, chief economist at BMO Capital Markets, notes that a strong U.S. dollar has put downward pressure on commodity prices.
Porter, however, emphasizes a broader concern: the budget deficit issue. He argues that neither presidential candidate has offered a concrete plan to address this pressing issue, raising concerns about potential economic instability.
The potential for aggressive tariffs under a second Trump term poses a significant risk to Canada’s resource-dependent economy. The country’s heavy reliance on resource exports could be jeopardized, impacting commodity-driven industries across North America.
Trump’s previous policies have demonstrated his support for the U.S. mining sector. In 2020, he issued an executive order backing critical mineral mining, emphasizing the need for American independence in this sector to maintain economic and military strength.
While Trump’s 25% tariff on imported steel and 10% on aluminum from 2018 was eventually revoked by the Biden administration, his focus on domestic mining could lead to further government support for domestic projects during his second term.
However, experts caution that the demand side of the equation needs attention. John Jacobs, a senior policy analyst at the Bipartisan Policy Center, highlights the lack of concrete measures to ensure a market for these domestically produced minerals.
The mining issue is complex and multifaceted, requiring comprehensive solutions that may extend beyond a single term. Currently, the U.S. lacks operational mines for crucial battery metals such as cobalt or graphite, with only one active nickel mine.
The market reaction to Trump’s re-election underscores the complex interplay between political developments and global commodity prices. As the implications of his second term unfold, the commodity markets will undoubtedly continue to experience volatility, posing challenges and opportunities for investors and businesses alike.
