The price of copper hit a record high in the US yesterday (8 July) as president Donald Trump suggested that imports of the red metal into the country could be slapped with a 50% tariff.
Trump told reporters “today we’re doing copper… I believe the tariff on copper, we’re gonna make it 50%.”
Copper futures on The Commodity Exchange (COMEX) spiked to $5.69 per pound, 13% higher than they had been trading prior to Trump’s comments, as US traders rushed to lock in supply of the key industrial metal before the tariff takes effect.
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“With tariffs looming, US buyers have rushed to bring in copper ahead of schedule,” said Tom Bailey, head of research at HANetf. “But much of this metal is not being consumed. Instead, it is sitting in warehouses or locked in financing agreements. Due to high US premiums, it is uneconomical to export.”
This so-called “trapped copper” could restrict supply to the rest of the world, pushing up prices, according to Bailey.
The strength of this market reaction is somewhat surprising given that tariffs on copper have been expected for some time.
“There’s been a Section 232 investigation underway since February, so markets have been aware [that copper tariffs could be implemented],” said Stephen Hare, lead economist at Oxford Economics.
The reason for yesterday’s volatility, according to Hare, is that the level of the tariff proposed caught markets off-guard.
“I think markets were expecting that to be a little bit lower, probably closer to between 10% and 25%,” he said.
Are LME copper prices rising?
Unlike COMEX copper, Trump’s comments appear to have depressed copper prices outside the US. Copper traded on the London Metals Exchange (LME) fell yesterday, pushing the premium for US-traded copper over London-traded copper to a record 25%.
This seems slightly counterintuitive, but it goes back to the fact that markets have long been anticipating a copper tariff to be implemented at some point.
“There’s been a massive arbitrage opportunity to try and ship as much copper to the US before the tariffs could come into effect,” said Hare. That has squeezed supply on other exchanges, causing LME copper prices to rise despite global copper supply currently outstripping supply.
Now that copper tariffs are becoming more of a known quantity, and could be implemented imminently, this arbitrage opportunity window is closing. That will likely see copper supply increase slightly outside the US, prompting ex-US prices to pull back.
When could copper tariffs take effect?
The timing of potential copper tariffs will also have a key bearing on pricing of copper outside the US market.
“If they come into effect in ~3 weeks, shipments already on route to the US will likely try to get there still, meaning the ex-US markets shouldn't face excess cargoes immediately,” said Amy Gower, commodities strategist at Morgan Stanley in a research note. “But it will be more challenging to ship any extra cargoes in a 3 week window, loosening ex-US markets going forward.”
The 50% copper tariff that Trump suggested hasn’t yet been officially confirmed, and as such there is no definitive timeline for its implementation. Initially, the White House did not respond to questions from CNN about its timing.
Secretary of state for trade, Howard Lutnick, later suggested that the copper tariff could come into effect in late July or on 1 August, giving US businesses that rely on copper supplies just weeks to secure supply at their current levels.
What is the long-term outlook for copper prices?
There is a deeper structural story at play with copper prices over the long term. Like silver, it is a key industrial metal with applications to a huge range of modern technologies.
“Copper sits at the centre of a looming supply-demand crunch,” said Bailey. “On one side is surging demand driven by grid upgrades, the rapid buildout of AI data centres, and the ongoing urbanisation of emerging markets. On the other is a supply base that is ageing, expensive, and increasingly unreliable.”
Bailey believes that these various demands for copper mean that it is “fast becoming a strategic resource.
“Its role in AI infrastructure and renewable energy has placed it in the crosshairs of trade policy and geopolitical risk,” Bailey added. “Like oil in the twentieth century, copper may increasingly be shaped by politics as much as by geology.”
What do rising copper prices mean for your money?
In theory, rising copper prices would increase inflation, given the centrality of copper to electronics and all manner of other daily spend. As an example of its ubiquity, most of the piping in your house is probably made of copper: any building or renovation work becomes more expensive if copper prices are higher.
The good news is that, as we’ve seen, it is only in the US that copper prices are spiking. Outside the country, they are coming down.
“At the minute, it’s very much going to be the US consumers that are going to pay more of that price,” said Hare. “The UK should be fairly insulated.”
“We are executing a downturn in US industrial production over the next couple of quarters, just because of the impact that the wider tariffs are having,” said Hare.
Since Trump first announced his ‘reciprocal’ tariff regime in early April there have been widespread fears that they could prompt a US recession.
But while copper supply outstrips demand for the moment, that could change in future.
“On current projections, copper supply is not going to keep pace with levels of demand over the long term,” said Hare, echoing Bailey’s views. “In the very short term we’re expecting that this is just a spike in volatility: prices should come back down once there’s a bit more clarity over the tariffs.
“But over the long run, we are quite bullish about copper prices.”
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