Trump's 50% import tariff on copper causes market turbulence: New York copper surges while London copper plummets

According to the Zhitong Finance APP, on July 8 local time, U.S. President Trump announced that a new 50% tariff would be imposed on all copper imported into the United States, but did not disclose the specific effective date of the new tariff. During a cabinet meeting at the White House that day, Trump stated, "I think we will raise the tariff on copper to 50%." According to reports, U.S. Secretary of Commerce Wilbur Ross stated after the cabinet meeting that the Department of Commerce had completed its investigation into the status of copper imports, and he expected the new tariff "might be implemented by the end of July or August 1."

The Trump administration's announcement of a 50% new tariff on copper imports into the United States has thrown the copper market into turmoil. On Tuesday, the main contract for copper futures on the New York COMEX saw an intraday increase of up to 17.3%, marking the largest intraday gain for New York copper since 1988; the contract closed up 13.1% at $5.6855 per pound, setting a new closing record. Meanwhile, London Metal Exchange (LME) copper futures prices opened on Wednesday with a decline of 2.4%.

The immediate price fluctuations between New York copper and London copper reflect that, in the short term, the rush to purchase copper in the U.S. market will drive up local prices, while supply in other regions remains relatively ample. Following Trump's statement, New York copper futures prices exhibited an unprecedented 25% premium over London copper futures prices, indicating that the market has not yet fully convinced itself that the Trump administration will implement the 50% tariff.

Citi referred to this as a "watershed moment" for the copper market, believing it will block a significant window for copper imports into the U.S. Marcus Garvey, head of commodity strategy at Macquarie Group, stated, "The extent of the impact will greatly depend on the details, not only the tariff rate but also the applicable forms of copper products and whether there will be a grace period."

As early as February this year, Trump hinted at the possibility of imposing tariffs on copper imported into the U.S. Since then, global traders have shipped a record amount of copper to the U.S. to get ahead of the tariff implementation. Imposing a 50% tariff on copper imports into the U.S.—which could be implemented in a matter of weeks—not only means that this arbitrage trading is about to end but also brings many uncertainties, such as the specific implementation time and whether there will be exemptions for major copper-producing countries.

The market had generally expected the import copper tariff level to be 25%, and the 50% cap makes the possibility of these "exemptions" even more critical. Additionally, the large influx of copper into the U.S. this year also means that the supply in this market is relatively ample in the short term. Marcus Garvey stated, "A 50% tariff is relatively bearish because it will more clearly suppress marginal demand in the U.S. and extend the inventory digestion period."

Due to the widespread use of copper in various industries and applications, once this tariff takes effect, it will lead to rising costs in multiple sectors of the U.S. economy. U.S. buyers have warned that this tariff measure could undermine Trump's core goal of revitalizing manufacturing. Jefferies analyst Christopher LaFemina and others pointed out in a report, "The U.S. currently lacks sufficient mining, smelting, and refining capacity to achieve copper self-sufficiency." Therefore, import tariffs may cause copper prices in the U.S. market to remain significantly higher than in other regions.

Against the backdrop of current insufficient capacity and difficulties in building new plants, achieving a higher self-sufficiency rate for copper in the U.S. is a long and challenging road. According to research by Morgan Stanley, net copper imports account for 36% of domestic demand in the U.S. Jefferies analysts stated, "The long-term goal of the Trump administration may be to achieve complete self-sufficiency in copper, but the mining development cycle is too long to achieve this within 10 years. For a considerable period in the future, the U.S. will still need to rely on foreign mines to meet copper demand."