Copper prices jumped by double digits on Tuesday after US President Donald Trump announced plans to implement a 50% tariff on the industrial metal.
“I believe the tariff on copper we’re going to make it 50%,” Trump said when asked by a reporter what the rate on those products would be.
In New York, the most-traded copper futures soared to a record $5.9535/lb. following Trump’s announcement, for an intraday gain of nearly 17%.
By Wednesday’s open, the contracts had pulled back to around $5.5580/lb.
The copper levy is part of a set of looming sectoral tariffs the US President has planned for select industries. Other sectors that may be impacted include drugs and semiconductors.
In late February, Trump directed the Commerce Secretary to open an investigation into foreign copper imports under Section 232 of the Trade Expansion Act.
While the timing of tariffs remains uncertain, it is widely expected that the global copper market will experience a dramatic change, especially as many have previously anticipated a lower tariff of 25%.
In a note put out Wednesday morning, BMO analysts predicted that the spread between New York and London prices — which reached as high as 26% on the tariff announcement — could “rapidly move towards 50% in the coming days” in response to the copper tariff.
At current LME prices of $9,800/t, this implies COMEX copper as high as $6.6/lb., they said.
Marcus Garvey, head of commodities strategy at Macquarie Group, also sees the S232 copper tariffs as a “bearish development for LME prices.”
“A 50% tariff is arguably comparatively bearish,” he said. “It would be more demand destructive at the margin in the US and extends the period of working down excess inventory.”
Yongcheng Zhao, principal analyst of the China copper market at Benchmark Mineral Intelligence, echoed a similar sentiment, predicting “continued volatility until the tariff officially kicks in, followed by the potential for a sharp decline.”
“The US does not have nearly enough mine/smelter/refinery capacity to be self-sufficient in copper,” Jefferies LLC analysts including Christopher LaFemina wrote in a note. “As a result, import tariffs are likely to lead to continued significant price premiums in the US relative to other regions.”
Citigroup called it a “watershed moment” for copper, whose demand is set to surge over the coming decade with data centers, automakers, power companies and others scouring the globe for feedstock.
In the short term, a crucial question for traders is whether or not copper being shipped to the US will be subject to import duties, which so far exclude scrap metal.
“The degree of impact will heavily depend on the details,” Garvey said. “Not only the rate of any tariff but which forms of copper it is applied to, and whether or not there is any grace period ahead of its implementation.”
The solution, therefore, would be for the US to boost production from copper scrap, which has historically been shipped to processors overseas, particularly in China.
In the long run, however, Trump’s idea of greater self-reliance in copper could be a fraught one given the paucity of existing capacity and the challenges in building new plants. Net copper imports account for 36% of demand, according to Morgan Stanley research.
“The longer-term aim of the Trump administration may be for the US to be fully self-sufficient in copper, but mines take too long to develop for this to be achieved in less than a 10-year time horizon,” Jefferies analysts wrote.
“The US will still rely on foreign mines to meet demand for the foreseeable future.”