Monte Independent Investment Research Vol. LXVI

Trade, Tariffs, Natural Gas, & AI

On This Week’s Agenda:

• Canada Finally Got the Memo

• US & China Trade Deal Nearing Completion

• Natural Gas

• Will Inflation Come Back?

• Oracle Corporation (NYSE: ORCL) Earnings

Canada Finally Got the Memo

On June 11, 2025, Bloomberg reported that the Canadian Industry Minister Mélanie Joly announced that the government will deploy countermeasures to foreign steel being dumped into the Canadian market in order to alleviate local production. This follows ArcelorMittal announcing that it will be permanently shutting down its facility in Hamilton, Ontario, citing challenging economics and rising steel imports into Canada.

This is a prime example of what happens when the chokepoint becomes unbearable. It also goes to show how detrimental the Canadian import market has been to the North American steel industry. Though higher steel prices will certainly trickle into consumer prices, having a durable materials industry is vital to the survival of a nation.

The Wall Street Journal reported last week that companies in the food industry, specifically those that produce canned food, will be impacted by rising steel prices, increasing the price of goods by roughly $0.18-0.30 per canned good.

The Campbell’s Company (NASDAQ: CPB) is one of the names that may be impacted during a time of long-declining operating margins in its Meals & Beverages market with domestic steel can production being virtually evaporated. Cleveland-Cliffs had previously exited the market and US Steel has wound down its tin-plate operations.

Accordingly, Canada currently has a 25% levy on Chinese imported steel and aluminum, potentially driving the Great North to implementing a similar tariff policy as the US at 50%.

US & China Trade Deal Nearing Completion

The US and China are nearing an end of the reciprocal tariff battle with China bearing the brunt of the blade. According to an article published by CNBC, US import duties on China will total 55% while China will impose a 10% import tax on US goods. President Trump announced that the deal is subject to final approval, but has stated that the rates will not change going forward.

The deal includes an assurance that the supply chain for rare earth elements will remain intact and not be used as leverage going forward. This goes beyond the temporary 6-month licensing agreements China has put in place during trade talks which has created significant uncertainty in the market, particularly for electric vehicle manufacturing.

The concession China is seeking out is advanced semiconductors, particularly access to Nvidia’s H20 GPUs, or its next generation B30 GPU.

Though the new tariff policy may add additional costs to production, I believe that alleviating industry from the uncertainty of the push-and-pull experienced in the last few months will be beneficial, allowing for more stability.

Tariffs have certainly had their impact across the market. Virtually every intermediate manufacturer has implemented a tariff mitigation policy that has resulted in price adjustments flowing through to the end market. Where prices land still remains full of uncertainty; however, a good proportion of price increases will for now result in industry taking on the cost and not necessarily the consumer.

Despite the inflationary pressures added to businesses and consumers, tariff policy appears to be working in the US government’s favor, raising $72.3b year-to-date.

Natural Gas Update

Natural gas has experienced some upward price stability in recent days following the military exercises between Iran and Israel. Two major oil and gas facilities were the targets of missile strikes over the weekend, resulting in the Shahran fuel & gas depot and an oil refinery in Shahr Rey going up in flames. Iran has suggested that a fuel tank outside an oil refinery caught fire and not the refinery itself. Iran’s South Pars gas field, which produces 2/3rds of Iran’s gas production, was also attacked. Perhaps now isn’t the right time for comic relief, but I wonder whose ESG score this will impact. Last time I checked, gas flaring was frowned upon.