Steel and materials markets fluctuated between rallies and pullbacks as the US-Canada trade relationship shifted from near agreement to open dispute. Nucor Corporation (NYSE:NUE) and Cleveland-Cliffs Inc. (NYSE:CLF) rose on August 25, after discussions between the two countries broke down, a turnaround from the week before, when several of the same stocks fell on hopes that a new deal would decrease steel and aluminum tariffs. The VanEck Steel ETF gained 1.6% on the day, while the State Street Materials Select Sector SPDR reached an intraday high. The rise didn’t last: by the end of the week, the materials ETF had slipped to negative territory, while the steel ETF was about flat, though, both remain substantially up for 2026.
A Fast-Moving Escalation
The volatility traces a rapid escalation. On August 19, Bloomberg reported that the US and Canada had tentatively agreed to reduce tariffs on Canadian steel and aluminum to 25% and vehicle charges to 15%. That optimism was dashed within days: on August 22, the US imposed 50% tariffs on a wide variety of Canadian exports, and Canadian Prime Minister Mark Carney responded by declaring Canada officially “at war” with the United States, saying “You’re at war when you’re attacked, and we got attacked.”
On August 25, Ottawa announced counter-tariffs of C$27.6 billion on American goods, which took effect on September 8 at rates ranging from 15% to 50%. The dispute has continued to escalate since then, with Washington announcing additional restrictions and tariffs on Canadian goods in September, reinforcing the view that a quick resolution remains unlikely.
Atsi Sheth, Moody’s chief credit officer, put it bluntly: “Expect much more of this uncertainty for some time to come.” Investors initially welcomed tariffs as good news for US steelmakers facing less Canadian competition, but the back-and-forth negotiations, as well as Canada’s reaction, have made predicting a steady outcome difficult.
Different Models, Different Stock Trajectories
The more intriguing story is how differently the aforementioned companies are positioned. Nucor Corporation relies primarily on scrap-based electric arc furnace steelmaking, while Cleveland-Cliffs Inc. operates a vertically integrated model with internally sourced iron ore, scrap and other raw materials. Both have meaningful domestic raw-material exposure, although their production models differ substantially. Nucor Corporation is up more than 50% year-to-date, while Cleveland-Cliffs Inc., despite similar structural insulation, remains negative for 2026, which analysts attribute to balance sheet stress rather than tariffs.
Smart Money Sentiment
Hedge fund ownership was largely stable across the two companies prior to this trade-driven volatility. Nucor Corporation saw a minor increase, from 59 funds in the first quarter to 62 in the second, reflecting the stock’s decent year-to-date performance and structural freedom from Canadian ore dependency. Cleveland-Cliffs Inc. remained unchanged at 53 funds in both quarters, implying that institutional investors have been sitting on the sidelines despite tariff-driven developments.
The Investment Case: Tariff Upside vs. Trade-War Risk
Tariffs working as intended for domestically oriented businesses would mean less Canadian competition and higher prices for imported steel and aluminum. Nucor Corporation and Cleveland-Cliffs Inc. could see long-term pricing benefits as long as elevated tariffs continue to limit Canadian competition. Nucor’s over 50% year-to-date gain shows the market is already valuing this structural insulation.
Moody’s own phrasing, “expect much more of this uncertainty,” implies that the volatility investors have experienced over the last few weeks is likely to persist rather than resolve into a solid resolution very soon. Canada’s retaliatory tariffs might affect American exporters in steel, dairy, agricultural equipment, and other categories, generating a second-order economic drag that could negate some of the pricing advantages that local steelmakers are already enjoying. Moreover, Cleveland-Cliffs’ negative year-to-date performance, despite structural tariff insulation, serves as a reminder that company-specific balance sheet issues can outweigh even a favorable trade environment.
The Verdict
This is a sector where trade headlines move faster than any company’s underlying fundamentals and investors should distinguish between companies that are structurally insulated from the back-and-forth, such as Nucor Corporation and Cleveland-Cliffs Inc., and those that remain exposed to cross-border supply chains. Given its scrap-based business and solid 2026 performance Nucor seems to be the most straightforward way to convey a positive tariff thesis but Cleveland-Cliffs’ underperformance despite similar insulation implies that investors should look into company-specific difficulties independent from the trade story. Given Moody’s warning that this uncertainty is likely to persist, investors in the sector should prepare for continued volatility as further negotiation news emerge rather than expecting a quick resolution.
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