Hot steel billets used for production of seamless pipes roll along the production line in a steel-making shop. (Photographer: Andrey Rudakov/Bloomberg)

Uncertainty Over Tariffs Drives Down Commodity Prices

Commodities took a beating this week as Trump’s tariffs led to uncertainty.

Steel fell more than 7 percent for the week, most since Jan. 19, in the Shanghai Futures Exchange while aluminium declined 2 percent.

U.S. President Donald Trump imposed 25 percent tariff on steel imports and 10 percent on aluminium. But he excluded Mexico and Canada till a new free-trade pact is signed and also kept the door open for more such exclusions.

It is still unclear as to which countries will be caught in the net, said David Lennox, research analyst at market research firm Fat Prophets, in an emailed statement to BloombergQuint. He said a potential trade war would dent consumer demand, which in turn, will impact commodity demand and prices.

The currency too plays a part in commodity prices. The U.S. in a strong position would lead to a rise in the U.S. dollar. That would be a negative for commodity prices, but a weaker dollar will bode well for commodities.

“Volatility can be assured and likely to be on the downside,” Lennox said. “We remain hopeful now that the worst of the above can be averted. A trade war would certainly muddy what was looking to be another good year for commodity prices.”

Fat Prophets would stick to the positive view as details about tariffs “remain at best sketchy”.

Uncertainty Over Tariffs Drives Down Commodity Prices