by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with news of another US government investment in a key critical minerals company. We next review several other international and US developments with the potential to affect the financial markets today, including signs that the Trump administration may be ready to negotiate with Democrats in Congress to end the federal government shutdown and expectations that the European Union will impose its own big, new tariffs on imported steel today.

US Private Property Policy: The White House yesterday said it will take a 10% stake in Canadian critical minerals firm Trilogy Minerals in return for approving a controversial road infrastructure project in Alaska. The road project will allow access to remote mineral resources sought by the company. In response to the news, shares in Trilogy tripled in value, mimicking the stock surges in other recent deals where the federal government has taken partial ownership of firms.

• It’s becoming obvious that a profitable near-term strategy for investors is to purchase private-sector enterprises that are in good graces with the administration, in which case they are likely to receive special treatment in terms of regulatory relief, contracts, or state investment and other support.
• Of course, the long-term risk is that mass “state ownership of the means of production” could lead to unprofitable decisions, high costs, and less economic efficiency.

US Fiscal Policy: President Trump late yesterday hinted that Republicans in Congress are in talks with Democrats over healthcare subsidies to potentially reach a funding compromise and end the ongoing federal government shutdown. Democratic leaders said no such talks are taking place, which suggests the president’s statement may have been a smokescreen or just a hint that he wants to discuss such a deal. Nevertheless, Trump also said he would like to see a deal on healthcare, pointing toward a potential path toward a funding deal and an end to the shutdown.

US Tariff Policy: In a social media post yesterday, President Trump said he will impose a 25% tariff on imports of medium and heavy trucks starting November 1. The announcement came just a day before Trump’s scheduled meeting with the prime minister of Canada, which would be heavily affected by the new truck tariffs. In the past, Trump has sometimes exempted Canadian and Mexican imports compliant with the USMCA trade deal, but his post yesterday made no mention of such an exemption.

US Artificial Intelligence Industry: In the latest AI-related tech deal, private AI model developer Anthropic is in talks to include its Claude model in IBM’s latest integrated developer environment, or IDE. If completed, the deal would make Claude available to software engineers using IBM’s tools at large businesses for tasks such as modernizing code or building proprietary AI agents. In pre-market trading so far today, IBM’s share price has risen about 4.6%.

US Energy Industry: Research by energy consulting firm Wood Mackenzie shows US firms plan to invest $50 billion in new and expanded pipelines in the next five years to cash in on booming natural gas demand and deregulation under President Trump. That amounts to some 8,800 miles of new pipelines aimed at removing bottlenecks that have arisen because of booming production, meeting record liquefied natural gas exports, and fueling electricity generation for data centers. Midstream firms involved in the boom include Kinder Morgan and Enbridge.

US Auto Industry: Novelis, which produces some 40% of the sheet aluminum used by US auto manufacturers, has announced that one of its major plants in New York has been knocked offline until early next year because of a fire three weeks ago. The shutdown is expected to disrupt production for major automakers. Reports suggest Ford is especially at risk, as its profit-driving F-150 pickup is particularly dependent on aluminum from the shuttered plant. Other automakers that could be affected include Toyota, Hyundai, Volkswagen, and Stellantis.

European Union-United Kingdom: According to the Financial Times, the EU today plans to impose a 50% tariff on all imported steel. All steel-exporting countries would face the tariff above quotas set at 2013 levels. If fully implemented, the protectionist tariff would likely be devastating for the UK, which currently sends some 80% of its steel exports to the EU. In response, trade association UK Steel warned that many of the UK’s remaining steel firms could go extinct unless the British government imposes its own protectionist tariffs.

Germany: The German government has recently granted domestic arms makers a string of “direct award” contracts with no public tenders, such as a 390-million EUR ($455 million) contract to Rheinmetall to develop anti-drone lasers. The direct-award contracts have sparked complaints by foreign defense contractors and members of parliament who say the deals could be wasteful. Another key takeaway is that Berlin may be prioritizing the development of its own defense technology to reduce its reliance on foreign suppliers, potentially including US defense firms.

Japan: Now that the ruling Liberal Democratic Party has selected conservative Sanae Takaichi as its new leader, putting her in position to become prime minister and push economic policy back toward stimulative “Abenomics,” one of her key advisors has said the Bank of Japan shouldn’t hike interest rates as expected this month. The statement by influential advisor Etsurō Honda suggests the central bank’s next rate hike might be delayed, which helps explain why the yen (JPY) has weakened further today, falling about 0.4% to 150.80 per dollar ($0.0066).

New Zealand: The Reserve Bank of New Zealand has established a new body with enormous powers to ensure financial stability and address prudential issues for banks. The central bank’s new Financial Policy Committee will set debt-to-income and loan-to-value ratios for banks, so it will also have enormous power over the country’s housing sector.

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