Cleveland Cliffs: Riding the Steel Tariff Wave to Dominance in EV and Infrastructure Markets

As U.S. steel tariffs surge to 50% under President Trump's June 2025 proclamation, Cleveland Cliffs (NYSE: CLF) stands at the forefront of a reshaped industry. Leveraging trade protectionism and bold operational restructuring, the company is positioning itself to capitalize on long-term demand for advanced steel in electric vehicles (EVs) and domestic infrastructure projects. While risks like China's rare earth mineral dominance linger, Cleveland Cliffs' strategic moves suggest a compelling buy for investors eyeing structural shifts in manufacturing and trade policy.

### Vertical Integration: The Foundation of Cost Leadership
Cleveland Cliffs' vertical integration—from Minnesota iron ore mines to finished steel products—is its crown jewel. By controlling the supply chain from raw materials to end products, the company avoids the volatility of spot markets and secures a cost advantage. This integration is critical as tariffs limit foreign competition, allowing CLF to raise prices without sacrificing volume. For instance, its July 2025 hot-rolled coil price rose to $950/ton, a 4.4% monthly increase, reflecting tariff-driven pricing power.

The company's restructuring efforts further amplify this advantage. By idling six non-core facilities (e.g., the Minorca mine, Dearborn Works blast furnace) and canceling a $500M green steel project in Weirton, CLF is focusing on high-margin automotive steel. These moves, expected to save $300M annually, underscore a disciplined shift toward profitability.

### Automotive Dominance: 36% Revenue, 100% Growth Momentum
Cleveland Cliffs supplies 36% of its revenue to the automotive sector, a position fortified by its role as North America's largest flat-rolled steel producer. Its C-STAR advanced high-strength steel system—a lightweight, durable material for EV battery enclosures and car frames—is a direct hit to rising EV demand. With global EV sales projected to hit 21 million units by 2030 (BNEF), CLF's automotive focus aligns perfectly with this megatrend.

The company's acquisition of AK Steel in 2020 also expanded its specialty steel capabilities, enabling it to supply premium products like those used in Tesla's Model Y and Ford's F-150 Lightning. While first-quarter 2025 results showed a $483M net loss due to weak pricing, the elimination of an unprofitable slab contract with ArcelorMittal/Nippon Steel by late 2025 is expected to boost EBITDA by $500M annually starting in 2026. This structural cleanup positions CLF to thrive as tariffs stabilize pricing.

### Trade Protectionism: A Tailwind, Not a Headwind
The 50% Section 232 tariffs, effective June 4, 2025, are a game-changer. By shielding U.S. producers from low-cost imports, tariffs reduce oversupply and allow CLF to reclaim market share lost to Chinese and Turkish steel in prior years. The July 9 deadline for the U.K.'s compliance with the U.S.-UK Economic Prosperity Deal adds geopolitical leverage, though the risk of a 50% tariff on U.K. imports could pressure CLF's suppliers.

Crucially, tariffs align with the Trump administration's “Buy American” agenda, which could accelerate domestic infrastructure spending. CLF's proximity to U.S. automakers and its vertically integrated model make it an ideal partner for reshoring efforts, shielding it from global trade shocks.

### Risks: Rare Earths and Supply Chain Friction
The largest risk lies in China's near-monopoly on rare earth minerals, critical for EV batteries and semiconductors. While CLF's steel is used in EV frames, its automotive customers face exposure to rare earth shortages. A sudden Chinese export ban could disrupt EV production, indirectly reducing steel demand. However, temporary agreements have eased tensions, and CLF's focus on high-value automotive steel—used even in conventional cars—buffers this risk.

Another concern is the $300M annual savings from idling facilities: if demand rebounds sharply, CLF may struggle to ramp up production without reinvesting in shuttered assets. Yet, the company's prioritization of profitability over scale suggests it will wait for sustainable pricing before reactivating capacity.

### Investment Thesis: Buy for Long-Term Structural Shifts
Cleveland Cliffs is a buy for investors willing to ride the twin waves of EV growth and U.S. trade protectionism. Key catalysts include:

1. Tariff-Driven Pricing Power: The 50% tariff wall ensures CLF can maintain margins even as global steel oversupply eases.
2. Automotive Tailwinds: EV adoption and lightweighting trends favor CLF's advanced steel products.
3. Cost Discipline: Restructuring savings and the slab contract exit will stabilize cash flow by 2026.





Despite a challenging Q1 2025, CLF's stock trades at 0.6x book value—below its 5-year average of 0.8x—and offers a margin of safety. Historically, however, short-term strategies like buying on earnings announcement dates have performed poorly, yielding an average annual return of -2.92% and a maximum drawdown of -72.69% between 2020 and 2025. This underscores the need for a long-term perspective to capture CLF's structural advantages, including tariff-driven pricing power and automotive tailwinds. Risks around rare earths and geopolitical trade are manageable given CLF's strategic focus and the administration's commitment to industrial resilience.

### Conclusion
Cleveland Cliffs is not just surviving the steel industry's turbulence—it's redefining it. By paring non-core operations, leaning into automotive innovation, and capitalizing on U.S. trade policies, CLF is primed to benefit from a manufacturing renaissance. For investors patient enough to weather near-term volatility, CLF represents a rare opportunity to bet on a company at the intersection of infrastructure revival and the EV revolution.

Rating: Buy
Price Target: $18 (2026E, based on 1.0x 2026E book value)

Disclosure: The analysis is based on public data and does not constitute financial advice. Always conduct independent research.