ALERT: Will These TSX Stocks Suffer From Trump’s New Tariff?

Trump has reignited the U.S.-Canada trade spat, but TSX stocks like Exco Technologies Ltd. (TSX:XTC) are not in any immediate danger.

| More on:
cup of cappuccino with a sad face

Image source: Getty Images

Canadians were preoccupied with a frustrating trade battle for much of 2018. United States president Donald Trump imposed tariffs on Canadian steel and aluminum in the spring of that year. This applied pressure as the countries attempted to negotiate a new trade agreement. Tensions have cooled since the United States-Mexico-Canada Agreement (USMCA) was drafted in the fall of 2018. However, TSX stocks could be at risk again, as Trump has reignited the trade spat.

Will the aluminum tariffs deal damage to this TSX stock?

This week, President Trump announced a 10% tariff on Canadian aluminum. In response, Prime Minister Justin Trudeau vowed to impose countermeasures. The U.S. tariffs will take effect on August 16. This will only apply to raw aluminum, which accounted for 59% of Canadian exports to its southern neighbour over the past year.

The last point is good news for Exco Technologies (TSX:XTC). Exco designs, develops, and manufactures dies, moulds, components and assemblies, and consumable equipment for the die-cast, extrusion, and automotive industries. It is a global supplier of aluminum-focused tooling. This light-weight option has become popular in recent years, especially in vehicles that aim to be more environmentally friendly.

Shares of this TSX stock have dropped 15% in 2020 as of close on August 6. Its sales have suffered in fiscal 2020, as the automotive industry has been hit hard by the COVID-19 pandemic. This is the more damaging headwind in the near term. However, Exco stock still possesses a favourable price-to-earnings ratio of 11. Moreover, it offers a quarterly dividend of $0.095 per share. This represents a strong 5.8% yield.

Two metals stocks that are still safe

Fortunately, Trump did not target the Canadian steel industry with his latest round of tariffs. Back in May 2019, I’d discussed whether investors should jump into metals stocks, as the trade battle had been shelved. Below are two TSX stocks investors may still want to consider today.

Russel Metals is a metals distribution company that distributes steel and other metal products in North America. Its shares have climbed 29% over the past three months as of close on August 6. The stock is still down 1% year over year. Shares of Russel Metals currently possess P/E ratio of 21 and a P/B value of 1.1. This puts the stock in solid value territory relative to industry peers. It still offers a quarterly dividend of $0.38 per share, representing a monster 8.2% yield. This TSX stock is a solid option for income investors.

Stelco is Hamilton-based company that produces and sells various steel products in North America. The stock has increased 19% in the last three months. Stelco still offers solid value, but it was forced to discontinue its dividend. Because of this, I’m more inclined to scoop up Russel Metals in early August.

How long will tariffs remain in place?

It is difficult to say what is behind this latest move from President Trump. Investors should not expect any serious ramifications for top TSX stocks in the near term. However, if this is a prelude to further trade battles, then that would be a negative development in a dangerous economic climate.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of EXCO TECH.

More on Dividend Stocks

grow money, wealth build
Dividend Stocks

Got $3,000? 3 TSX Growth Stocks to Buy in January 2023

Top TSX growth stocks that look appealing for 2023.

Read more »

woman data analyze
Dividend Stocks

Need Passive Income? Turn $15,000 Into $851 Annually

This passive-income stock is already climbing higher, up 16% in the last three months! Yet it's still valuable, so you…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Retirees: 3 Reliable Canadian Dividend Stocks to Buy Now for Passive Income

Top TSX dividend stocks now appear oversold.

Read more »

Dividend Stocks

For $100 in Passive Income Each Month, Buy 1,500 Shares of This REIT

REITs such as Northwest Healthcare can enable investors create a passive-income stream as well as benefit from capital gains.

Read more »

A colourful firework display
Dividend Stocks

2 Canadian Growth Stocks (With Dividends) to Start 2023 With a Bang

Here are two of the best dividend-paying Canadian growth stocks you can invest in at the start of 2023 and…

Read more »

sale discount best price
Dividend Stocks

4 Insanely Cheap Canadian Stocks to Buy for Passive Income

The recent bear market has created some incredible bargains, especially for those looking for passive income. Here are four cheap…

Read more »

A bull outlined against a field
Dividend Stocks

3 Cheap Stocks I’d Buy Before the Bull Market Arrives

Undervalued TSX stocks such as Savaria and Well Health can help investors generate market-beating gains when markets recover.

Read more »

Increasing yield
Dividend Stocks

5 Canadian Dividend Stocks With Yields of 4% or More

If you want dividends that yield over 4%, you don't have to look far. Here are five large-cap Canadian stocks…

Read more »