Why Cleveland-Cliffs Stock Just Dropped

Cleveland-Cliffs (NYSE: CLF) stock fell 8.5% through 2:10 p.m. ET Tuesday after Reuters reported on new trade negotiations between the U.S. and Mexico that could significantly roll back 50% tariffs on steel imports -- which had themselves been announced only last week.
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50% -- up to a point
The negotiations would not affect all steel imports -- only those from Mexico, and only to an extent. While details haven't yet been made public, Reuters reports the idea will be to permit a certain quota or specified volume of steel to come into the U.S. from Mexico duty free, or at a reduced tariffs rate. Imports in excess of that quota or volume limit would still pay the 50% tariff.
And of course, the 50% tariff will remain in place for imported steel from other countries.
Is Cleveland-Cliffs stock a sell?
Just the rumor of the creation of this single Mexican loophole, though, seems to have shaken investors' confidence that Cleveland-Cliffs stock is a sure thing -- and no wonder. After all, if tariffs can be renegotiated lower with one country, they can be renegotiated lower with other countries as well -- or even lowered back down to previous levels with entire regions (such as the E.U. or North America), or with the world as a whole.
That would be bad news for Cleveland-Cliffs investors, who've been counting on tariff policy to help turn their company profitable again, after losing $754 million a year. At the same time, the company has to worry about domestic competition from a U.S. Steel that will soon be backed by money from Japan's Nippon Steel.
It's a good reminder for investors: If you're counting on a change in government policy to save your stock, you may be setting yourself up for a fall.
Should you invest $1,000 in Cleveland-Cliffs right now?
Before you buy stock in Cleveland-Cliffs, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cleveland-Cliffs wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $649,102!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $882,344!*
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