Why Cleveland-Cliffs Stock Was a Massive Winner in June

June was a banner month for American steel producer Cleveland-Cliffs (NYSE: CLF). It received much investor attention after President Trump signed an executive order doubling tariffs on steel coming into this country, a move that will directly and clearly benefit Cleveland-Cliffs if it holds. Over the month, investors clearly bet it would, and traded the company's stock more than 30% higher.

Steeling for a fight

Trump's latest steel tariff was actually imposed weeks before the so-called "Liberation Day," when a clutch of duties on imports was announced. On Feb. 10, the president reinstated a 25% levy on all foreign steel, a tariff regime that he had originally set during his first term in office in 2018.

Image source: Getty Images.

In the opening days of June, Trump quite literally doubled down on the steel tariff, resetting it to 50%; it took effect on June 4. As if such a high rate weren't punitive enough, the White House said in a statement that foreign importers of the metal would be required to follow "strict reporting of steel and aluminum content, with tough penalties like fines or loss of import rights for violators."

So it's little wonder that investors were so keen to pile into Cleveland-Cliffs, the Ohio-based steelmaker with roots stretching back to the mid-19th century. A major impetus behind Trump's aggressive tariff regime is to encourage American manufacturing, and Cleveland-Cliffs -- the largest producer of flat-rolled steel in this country -- is a prime candidate.

The company could use the help, too. Annual revenue has fallen in each of the past two years, with the bottom line landing deeply in the red (at $754 million, on nearly $19.2 billion in revenue) in 2024. Cleveland-Cliffs has also been unprofitable in four of its last five quarters.

Not all tariff-related news was beneficial for the company (or the broader American steel industry, while we're at it). Mere days after Trump raised that steel levy, a Bloomberg reported citing unnamed "people familiar with the matter" stated that U.S. and Mexican officials were close to a deal that would reduce that 50% steel tariff on that country's manufacturers.

Don't count on it lasting

In this most recent trade war, Trump has shown a willingness to reduce levies in negotiations with certain partner nations overseas. So investors shouldn't have all that much confidence the current steel regime will stick -- 50% is an awfully high number, after all.

If it were to melt away to any significant degree, or if countries like Mexico successfully negotiate exemptions, Cleveland-Cliffs would lose that hard-to-beat competitive advantage. With its loss-making ways in the recent past, that might not be the most healthy development for the company's stock.

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Eric Volkman has 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.