This week’s blog is written by portfolio manager, Ian Jensen-Humphreys.
As I write this blog, the latest update in the protracted and messy tariff war sees President Trump threatening that the US might yet increase tariffs on the UK’s steel exports to 50% after the 9 July – threatening the UK’s carve out that we thought Keir Starmer had previously negotiated.
But does it actually matter?
It almost certainly doesn’t matter to the US steel industry. In 2024 the US imported 26.2 million metric tonnes of steel. The UK accounted for just under 1% of that, at 240 thousand tonnes. The largest exporter to the US, Canada, exported over 20 times the amount of steel to the US that the UK did (1) .
It also probably doesn’t matter that all that much to the UK steel industry. In 2023 the UK steel industry produced 5.6 million tonnes of steel (2) . So the US exports were slightly under 5% of our total steel production. Of that production, 54% is used within the UK and 46% or 2.6 million tonnes is exported, with Europe comfortably the largest export market. The UK already imports more steel than it exports (by nearly 2.0 million tonnes), so presumably this is a good opportunity to reduce some of those imports?
Given all the information we have access to every day, one of our most important abilities is to sort the wheat from the chaff – that is to capture and analyse the information that is relevant for the portfolios and ignore the daily “noise” that sustains the many 24-hour news stations but ultimately doesn’t really impact portfolios.
In this case, we really don’t care about the steel issue in isolation. But this is relevant information for us, because of what we can infer when we look ahead to the wider context of the more substantive US trade negotiations coming soon (such as with the EU or China). We learn from this latest development that we should expect uncertainty not just before and during the negotiation of a deal, but also even after a deal has been announced. So tariff related uncertainty might last a lot longer than we currently fear.
Any why does uncertainty matter? Because markets don’t like uncertainty, and because companies don’t like uncertainty. Uncertainty means a company is a bit less likely to make that new hire, to build that new factory or to launch that new product – the path of least resistance is to wait a bit, conserve some cash and re-evaluate further down the line with (hopefully) a bit more certainty. All this means that uncertainty is bad for growth – which needs companies to expand and hire and for those new employees to spend their wages and so on.
Our analysis around expected future growth is one of the key inputs we use when thinking about the amount of risk to take in portfolios, when we decide whether to be underweight or overweight equities. So anything that might impact future growth – that is definitely something we care about.
1.United States Steel Imports Report
2.https://www.uksteel.org/versions/2/wizard/modules/fileManager/downloadDigitalFile.php?url=https%3A%2F%2Ffiles.cdn-files-a.com%2Fuploads%2F8346772%2Fnormal_66598a0205388.pdf
Ian is a portfolio manager of the Quilter Investors Cirilium and Creation Portfolios. Ian joined Quilter Investors in March 2020 from Seven Investment Management (7IM), where he was deputy chief investment officer. Ian also spent 15 years at Goldman Sachs in risk management and portfolio hedging strategies.
Ian is a CFA charterholder and has a degree in Physics from the University of Oxford.
Market impact of US tariff rulings
The US Court for International Trade judged that the so-called reciprocal Liberation Day tariffs illegal and means that the administration must stop collecting those tariffs (and start to refund those collected to date).
Our Portfolio Manager, Sacha Chorley, looks at the possible implications.
