Trump threatens 50% copper tariff, arbitrage window sharply expands, how will copper prices perform in the second half of the year?

According to CCTV News, Trump announced on Tuesday that he is considering imposing tariffs of up to 50% on copper imports. This level far exceeds the previously expected 25% by the market, quickly igniting the global copper market within hours: the New York COMEX copper price surged by 17% at one point during trading, reaching a historic high; however, the London LME copper price slightly declined, with the arbitrage price difference soaring to nearly $3,000/ton.

This "pricing gap" is rapidly breaking the original global balance of the copper market.

According to Chase Trading Desk, the latest research reports from Goldman Sachs and JP Morgan believe that the short-term arbitrage window will continue to expand. JP Morgan expects that the arbitrage price difference between the two will further widen from the current 25% to 50%, and there may even be short-term "overshooting."

Goldman Sachs believes that the current market's implied tariff pricing for the December contract arbitrage price difference is about 30%, reflecting that the market is factoring in a roughly 60% probability of "the 50% tariff being fully implemented."

Morgan Stanley pointed out that since the COMEX copper price reflects the "post-tax" domestic sales price, and the United States is the world's largest net importer of copper, the implementation of tariffs will directly raise domestic copper prices. Although a large amount of "panic-imported" inventory will play a buffering role in the short term, in the medium term, the U.S. will experience a 4-5 month "de-stocking cycle," and copper imports will drop to a low.

HSBC believes that as the U.S. enters a "de-stocking cycle" in the coming months, copper imports will plummet, and overseas surplus copper will flow back into the global market, especially the Asian market. This dynamic will alleviate the global copper tightness caused by U.S. purchases, and LME inventories will gradually recover, with price levels moving downward.

HSBC, JP Morgan, and Morgan Stanley all expect that LME copper prices will drop to around $9,000/ton in the second half of 2025. HSBC expects the average price in the second half to be below $9,000, while JP Morgan predicts a copper price of $9,100 in the third quarter, with a slight rebound to $9,350 in the fourth quarter. Goldman Sachs maintains its previous forecast that LME copper prices will remain at $9,700/ton by the end of the year, believing that due to ongoing market tightness, the upside price potential is limited, but the downside potential is also constrained.

Arbitrage Window Rapidly Expanding

Although Trump's remarks seem impromptu, Goldman Sachs believes that the short-term execution probability has sharply increased, adjusting its baseline forecast to "a 50% tariff will be implemented," and noted that the market has priced in an implied tariff level of about 30% for the December 2025 contract. At the same time, arbitrage trading is rapidly heating up, and Goldman Sachs reiterates its prediction that the COMEX-LME price difference will further expand in the next 12 months.

JP Morgan pointed out that the widening arbitrage spread is due to U.S. importers making large pre-purchases to avoid tariffs. Data shows that U.S. copper imports in the first half of 2025 have approached last year's total level, about 850,000 tons, accounting for 1.5% of global demand. The bank expects that the U.S. will enter a "de-stocking cycle" in the next 4-5 months, leading to a sharp reduction in copper imports and a supply rebound in overseas markets Currently, the price difference between COMEX and LME has widened to $2,400/ton, equivalent to a 25% premium over LME copper prices. JP Morgan expects that as policies are implemented, this arbitrage spread may quickly expand to 50% or even higher. The formation of such an extreme price difference is a direct consequence of U.S. copper users concentrating their imports before the tariffs take effect.

After the Frenzy, the U.S. Faces "Copper Saturation," Mid-term Copper Prices Under Pressure

With the short-term exit of U.S. demand, the supply and demand relationship in overseas markets will reverse, putting downward pressure on LME copper prices.

HSBC believes that as the U.S. enters a "de-stocking cycle" in the coming months, copper imports will plummet, and surplus copper materials from overseas will flow back into the global market, especially the Asian market. This dynamic will alleviate the previous global copper tightness caused by U.S. purchases, and LME inventories will gradually recover, with price levels shifting downward.

JP Morgan further points out that major copper supplying countries (such as Chile) will be forced to redirect exports to Asia, coinciding with a slowdown in copper demand in China in the second half of the year, potentially creating a dual pressure of "increased supply + decreased demand," which constitutes a systemic bearish factor for LME copper prices.

HSBC, JP Morgan, and Morgan Stanley all expect that LME copper prices will drop to around $9,000/ton in the second half of 2025. HSBC predicts that the average price in the second half will be below $9,000, while JP Morgan forecasts a copper price of $9,100 in the third quarter, with a slight recovery to $9,350 in the fourth quarter.

However, Morgan Stanley warns that despite short-term price pressures, medium to long-term copper prices will remain high due to tight global supply. Especially after "additional copper resources" are locked into U.S. inventories, the tension in overseas markets may continue.

Goldman Sachs maintains its previous forecast that LME copper prices will remain at $9,700/ton by the end of the year, believing that due to ongoing market tightness, the upside potential for prices is limited, but the downside space is also constrained.

Although the market is pricing in a "50% tariff," Goldman Sachs cautions that this rate may merely be a "anchor point" used by Trump for negotiations, with the possibility of subsequent reductions or exemptions. Previously, tariffs on steel and aluminum were raised from 25% to 50%, and the market currently prices this at an 80% probability; copper prices may follow a similar path, creating a trading game of "high expectations, low realizations."

High Copper Prices in the U.S. May Trigger Demand Substitution

It is worth noting that the sharp rise in domestic copper prices in the U.S. after the imposition of tariffs will also bring additional issues.

JP Morgan points out that rising copper prices may stimulate companies to accelerate the transition to aluminum or other substitute metals, posing a threat to U.S. copper consumption in the medium to long term. Currently, U.S. copper consumption is mainly concentrated in construction (30%), transportation, and machinery (each about 14%), and these industries are highly sensitive to changes in material costs In addition, if the United States implements additional protective measures such as copper scrap export restrictions, it may further disrupt the global supply and demand structure for refined copper, bringing more uncertainty to price trends.

Copper Mining Stocks Under Short-Term Pressure, Long-Term Investment Opportunities Emerge

In terms of industry allocation, HSBC, JP Morgan, and Morgan Stanley maintain an optimistic long-term outlook for copper mining companies.

Although short-term price pressures will affect profitability, they believe the current pullback provides a good entry opportunity for long-term investors.

Morgan Stanley views this tariff as a "one-time, short-cycle" impact, and as the global inventory tightness caused by U.S. stockpiling has not fundamentally eased, long-term copper prices remain resilient. The firm recommends buying leading Chinese copper mining stocks on dips