Washington's tariffs on steel imports have prompted warnings of an earnings hit for European producers but for companies such as Luxembourg-based ArcelorMittal with operations in increasingly protected markets, levies are expected to yield a profit bonanza.
The United States slapped 25 per cent tariffs on steel imports earlier this year, prompting such shipments to fall 7.5 per cent to 18 million tonnes in the first half, with further declines expected.
The tariff move coupled with strong demand has sent US hot rolled coil steel futures to decade highs around $900 a tonne, up 35 per cent on the year.
This has been a boon for European steel makers that can still sell into the United States despite the tariffs, and which since July have been protected by EU steel tariffs imposed in response to the US levies.
European steel makers are also benefiting from capacity cuts in China and robust global growth.
Despite this, investors are reticent to bid up the stocks due to concerns the global trade rift triggered by Washington's steel tariffs will be protracted, eventually damaging growth and demand.
"Trade wars are a risk, but right now steel stocks are only pricing in negatives," a Swiss-based fund manager said.
The Thomson Reuters index of European steel equities is down 5 per cent this year, highlighting trade fears. By contrast, European hot rolled coil steel prices have risen 5 per cent in the same period.
ArcelorMittal, Europe's biggest steel maker and the second-largest in the United States, posted bumper profits for the latest quarter, citing protectionism as one reason.
"People assume tariffs are bad for all companies, but in the case of steel makers, tariffs are rather good," said Fabrice Theveneau, head of global equities at Lyxor Asset Management.
Also a plus is that steel makers outside China are mostly using profits to repay debt instead of investing in new capacity, just as Chinese capacity is shrinking, analysts and investors say.
China produces half of the world's steel. It has cut 150 million tonnes of steel capacity since 2016, while its steel exports plunged 31 per cent last year.
"Steel makers have never had it so good," said Alistair Ramsay, head of research at Metal Bulletin Research. "We see a high pricing environment for steel majors for some time, they just can't be ridiculous [with price rises]."
Mr Ramsay sees US hot rolled coil prices down $100 a tonne by the year-end as local steel makers boost production and high prices crimp demand, but believes steel makers' profits will be protected.
This is because they can afford to cut prices - a move that will allow them to sell more in a fast-growing economy.
In the EU, by contrast, prices are expected to rise by the year-end as tariffs cut steel imports by 5 million tonnes or 3 per cent, according to investment bank Jefferies.
Earning multiples also suggest steel equities are cheap, the bank says.
However, while Europe's multinational producers may be riding a wave, companies that rely on steel for the manufacture of their goods for export are more concerned.
The US has finalised the next China tariff list targeting another $16 billion in imports as of August 23, the US Trade Representative's office said recently.
China is slapping additional tariffs of 25 per cent on $16bn worth of US imports from fuel and steel products to cars and medical equipment, the Chinese commerce ministry said last week, also activating them on August 23.
In the case of China, Mr Trump threatened that he was ready to impose tariffs on an additional $500bn of imports. The United States has already imposed tariffs on $34bn of Chinese imports. In return, China has levied taxes on the same value of US products.
In response, China-based car dealers said Mercedes maker Daimler has moderately raised prices in the country of its GLE midsize 4x4, which is produced in Alabama. Daimler is looking at ways to mitigate the impact of the trade tensions, including reviewing whether to shift some US production to Asia. The company blamed tariffs for a 30 per cent drop in second-quarter profit.
Chinese-owned Volvo Cars said it was shifting production of its top-selling 4x4 production for the US market to Europe from China to avoid Washington's new duties on Chinese imports.
The Alliance of Automobile Manufacturers, whose members include General Motors, Volkswagen and Toyota, also warned on the impact of the tariffs. A study released by a US car dealer group warned that the tariffs could cut US car sales by 2 million vehicles.
Elsewhere, wind turbine maker Siemens Gamesa warned that trade tensions would drive up US costs by 2 to 4 per cent, depending on the product and whether further tariffs are imposed. The company is working to reduce the impact on margins by optimising its supply chains.
French electrical equipment company Schneider Electric foresees growth slowing in the second half of the year and expects the first extra costs linked to higher US tariffs, which could reach €20m (Dh83.83m).
It remains to be seen whether Europe's big steel makers will suffer the same jitters if the US-China trade fight goes long term.
European manufacturers steel themselves for pain
German engineering group Siemens said threats to free trade by tariffs are a concern, sees potential clouding on investment dynamics due to geopolitical tensions.
France-based electronic equipment manufacturing company Actia Group maintains its goal of moderate growth in 2018; however says the tensions may limit the increase in profitability year-on-year.
German car maker BMW started building its X3 model in China, ending its imports from the company's plant in Spartanburg, South Carolina, and raised prices on the X5 and X6 models to compensate for the tariffs. The company said earlier that it would be unable to "completely absorb" a 25 per cent Chinese tariff on imported US-made models.
Fiat Chrysler cut its 2018 outlook, hurt by a weaker performance in China. Its operating profit for the second-quarter was negatively impacted by China import duty changes, it said.
"If the trade war escalates we are more concerned about the consequences that it can have on global macro environment," STMicro said, adding that the direct impact of trade war risks were currently negligible.
Sweden's Electrolux said US tariffs announced in July would have an impact of $10m plus this year. In the third quarter. It expects raw material costs to rise by 500m Swedish kroner (Dh200.9m)
Swedish lock maker Assa Abloy sees a further increase in steel prices in the second part of the year in the US, partly due to new import tariffs.