European steelmakers traded firmly higher Friday, with mining stocks following suit, after a jump in iron ore prices linked to a brewing trade dispute between the U.S. and China.

U.S. President Donald Trump said Thursday that he would launch an investigation into anti-competitive practices from China's steelmakers, whom he accused of dumping cheap exports into the American market, and hinted at possible tariffs in reply.

"Steel is critical to both our economy and our military," the President said. "This is not an area where we can afford to become dependent on foreign countries."

China market reaction, however, lifted iron ore prices by more than 6% to around $73.45 a ton and coking coal prices, a key ingredient in the steelmaking process, gained 5.5%.  European steelmakers surged in early Thursday trading, as well, with Germany's ThyssenKrupp AG (TKAMY) rising 1%, France's Vallourec SA (VLOWY) gaining 1.5% and Franco-Indian giant ArcelorMittal SA (MT) jumping 3.09%.

Mining and basic materials stocks were also on the rise, lead by a 2.6% gain for Rio Tinto plc (RIO) and a 1% advance for BHP Billiton plc (BHP) .

U.S. steelmakers surged in Thursday trading, as well, following the President's comments, which were supported by his Commerce Secretary, Wilbur Ross. The S&P Composite 150 Steel subindex gain 5.21%, its biggest gain since late November, thanks in part to significant gains for Nucor Corp. (NUE) (4.74%), AK Steel Holding (AKS) (8.6%) and Steel Dynamics (STLD) (6.8%).

The moves follow a volatile week for iron ore prices after China government data showed that steel output rose to a record 72 million tonnes last month, up from 70.65 million in the same month last year, against flat end demand in the world's second largest economy. China's steel output surpassed 200 million tonnes in the first three months of this year, the National Bureau of Statistics said, up 4.6% from the first quarter of last year.

Iron ore futures hit a three-month low of around $70 a tonne, the lowest since January, on one exchange while futures in Shanghai dipped to the lowest levels since early February earlier this week before hitting $74 in Friday trading.

That said, China's first quarter GDP came in at a robust 6.9% and, despite efforts from Beijing to cool the country's housing market, building demand is anticipated to remain strong throughout the year and beyond - particularly given the government's ambition to establish a new "Special Economic Zone" near the city of Shenzhen.

However, there are increasing signs of downward price pressures from major producers, at least in the near-term. Last week, China's biggest listed producer, Baoshan Iron & Steel, cut its May deliver prices for hot rolled coil while Tokyo Steel Manufacturing Co. Ltd. said it would keep its May price forecast unchanged "as the overseas steel market is weakening after Chinese steelmills cut prices," according managing director Kiyoshi Imamura, who nonetheless expected medium-term price support as projects linked to the 2020 Olympic Games in Tokyo get underway later this year.

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