Why Cleveland-Cliffs Stock Got Hammered Today, Even Though Trump's Tariffs Were Supposed to Help Steelmakers

Shares of U.S. steelmaker Cleveland-Cliffs (NYSE: CLF) plunged 16.9% on Thursday, which was significantly worse than the 4.8% plunge experienced by the S&P 500 index.

Some might be confused as to why Cleveland-Cliffs, a domestic steel supplier, would be down so much on last night's sweeping tariff announcements from the Trump administration. After all, Cleveland-Cliffs is one of the larger domestic steel producers in the United States. So aren't the administration's tariff policies supposed to help prop up prices for domestic steelmakers?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

As investors may have found out back in 2018 when steel tariffs were implemented and trade wars ramped up, adversarial trade policies aren't the greatest for steel end-market demand, especially autos. Back then, the drop in demand proved to outweigh the benefits of the tariffs, and that's certainly what investors expect now.

Cleveland Cliffs making layoffs, not building new plants

Cleveland-Cliffs had already felt the negative effect of tariffs even prior to last night's announcement. One week ago, the company announced it would be laying off 600 employees and idling one of its steel plants in Dearborn, Michigan, this summer.

That announcement came on the heels of an earlier layoff announcement by the company in mid-March, when it announced the "temporary" layoffs of 630 workers at two of its mining operations in Virginia and Hibbing, Minnesota. Of note, Cleveland-Cliffs is vertically integrated, with both iron ore mines as well as downstream steel operations.

This may seem counterintuitive. After all, 25% tariffs on steel, which had already been announced before last night's more sweeping measures, are supposed to protect domestic steelmakers, boosting demand and therefore sustaining employment.

However, it appears tariffs are having the opposite effect, at least in the near term. While last night's tariff announcements shocked the market with their size and scope, the mere threat of tariffs leading up to April 2 had already depressed demand, especially for autos, a key end market for steel. And it appears the tepid demand is overwhelming any incrementally higher prices for domestic steelmakers as a result of tariffs.

Management offers an optimistic spin

In conjunction with the steelmaker layoffs, Cleveland-Cliffs said in a statement: "These actions will allow the company to operate more efficiently and in a more cost-competitive way for the current market environment. ... We believe that once President Trump's policies take full effect and automotive production is reshored, we should be able to resume steel production at Dearborn."

While management is painting an optimistic picture -- perhaps in an attempt not to offend the current administration -- it is very unclear when demand for big-ticket items such as autos could reignite. After all, tariffs are a regressive tax on consumers, which will make a broad array of the U.S. population less able to purchase a car, especially if the very high tariffs announced last night go into full effect.

Should you invest $1,000 in Cleveland-Cliffs right now?

Before you buy stock in Cleveland-Cliffs, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cleveland-Cliffs wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $676,774!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 1, 2025

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.