The President of the United States announced that he will restore tariffs on steel (25%) and aluminum (10%) imports from Argentina and Brazil due to the strong devaluation suffered by their currencies.
It should be remembered that this policy had been announced in early March 2018. However, the U.S.Trade Representative paused the imposition of tariffs on the countries with which they were negotiating exemptions, among them Argentina, Brazil, Nafta and European Union countries, Australia and South Korea. In April 2018 Argentina had achieved a temporary exemption from tariffs on imports of steel and aluminum in the United States, and in May 2018 it had been agreed that the volume exempt from charges would be 180.000 tons per year, a similar amount to those registered in recent years.
In the case of Ternium Argentina, exports represent 15% of sales volume, and 28.7% of that percentage is slipped to North America, so it is estimated that the direct impact would not be significant.
Regarding Aluar, 80% of the sales volume is shipped to external markets, and about 70% of its exports go to the United States and Mexico. If the announcement is validated, it is possible for the company to review the destination of its exports, analyzing the possibility of relocating a portion. Taking into account the aforementioned proportions and the magnitude of the tariff rate, it is estimated that the negative impact on revenue would be around 3.9% for this fiscal year, which is believed to affect the target price downwards around 3% / 3.5%.
Beyond the consequences on steel and aluminum, the announced measures bring some uncertainty about whether they constitute a sign of less support from the US to Argentina in general terms due to the change of government.