U.S. steel stocks have had a tough run under President Donald Trump, but Bank of America analyst Timna Tanners says things might not get much better for steel stocks if presumptive Democratic nominee Joe Biden wins the White House in November.

Biden now has a 20-point lead over Trump, according to the online prediction market PredictIt.org. While steel investors may assume a Democratic victory in November would result in the rollback of Trump’s Section 232 steel and aluminum tariffs, Tanners said tariffs have historically been a nonpartisan issue. Both sides of the political aisle voiced concerns about Trump’s steel tariffs.

While the tariffs seemingly haven’t done much to improve steel prices and margins during the Trump presidency, Tanners said Monday that removal of the tariffs at this point would have a negative impact on prices during a critical period for the industry in which it is overbuilding capacity.

Other Political Factors

One potential partisan headwind for the steel industry could be the fate of Trump’s border wall with Mexico. Most of the pipe for the proposed border was expected to be delivered by the end of 2020. Tanners said Democrats would likely halt construction of the wall, but whether or not they would tear down and scrap what has already been built could have a major impact on near-term steel prices.

Two additional major political catalysts could have a significant impact on the US steel industry, according to Tanners. First, Biden’s plan to raise corporate tax rates from 21% to 28% would hurt steel stocks is Democrats gain control in Washington. However, a clean sweep by Democrats could also improve the chances that an infrastructure spending bill will be passed, a potential positive tailwind for steel demand.

How To Play It

For now, Tanners said investors should be careful in the U.S. steel space.

“Ultimately, a potential Democrat win would add to our already cautious thesis on most U.S. steel names,” Tanners wrote in a note.

Bank of America has Underperform ratings on Nucor Corporation NUE 1.56%, Steel Dynamics, Inc. STLD 1.7% and United States Steel Corporation X 2.75%. Bank of America has a $34 target for Nucor, a $23 target for Steel Dynamics and a $3 target for U.S. Steel.

Benzinga’s Take

At this point, the U.S. steel group is a highly speculative space given the tremendous political risk and uncertainty regarding the election and the potential outlook in 2020 and beyond. Add in the uncertainty created from the COVID-19 outbreak and the trade war with China, and there are simply too many unknowns for investors to have much confidence in steel stocks these days.