The global copper market experiences a "huge shock," and those betting on "TACO" have won again

Trump unexpectedly implemented exemptions on major refined copper products, overturning market expectations and causing significant losses for traders who had previously bet on rising U.S. copper prices, while those speculators who wagered that "Trump would always change his mind" reaped substantial gains.

According to CCTV News, on July 30 local time, U.S. President Trump signed a notice announcing that starting August 1, only a 50% tariff would be imposed on semi-finished products such as copper pipes, copper wires, and cables, while exempting refined copper, including cathode copper and anode copper, which are mainstream in international trade.

This move immediately triggered a violent market reaction, with copper futures prices on the New York Commodity Exchange plummeting 22% on Wednesday, marking the largest single-day drop since at least 1988.

(Copper futures prices plummeted over 20%)

The dramatic market shift means that a large number of long paper positions established based on expectations of U.S. protectionist policies are facing huge losses, while traders known as "betting that Trump would always change his mind" (TACO) enjoyed astonishing returns.

Data from the options market shows that over 31,000 contracts turned from out-of-the-money to in-the-money (floating profit status) overnight, with a nominal value soaring to $3.54 billion.

"The Most Profitable" Trade Collapses in a Day

Trump's unexpected move caused the arbitrage strategy, hailed as "one of the most profitable commodity trades in modern history," to collapse instantly.

Since Trump first hinted at possible tariffs earlier this year, U.S. copper prices have surged significantly compared to other global markets.

To obtain high premiums, global traders rushed to ship copper to U.S. ports. In early July, Trump announced that the tariff rate would be higher than expected at 50%, further intensifying this rush.

The core of this strategy lies in the significant price difference between New York Comex copper and London Metal Exchange (LME) copper.

Just a week ago, the premium for Comex copper exceeded 20% over the LME benchmark price. However, once the news of the tariff exemption broke, the price difference quickly vanished. Comex copper prices plummeted 22% on Wednesday, while LME copper prices only fell by 0.9%, with the former even turning into a discount to the latter.

(Yellow line COMEX New Copper vs. White line LME London Copper, on July 23, New Copper's premium once exceeded 20% over London Copper's benchmark price) Goldman Sachs analysts stated:

This is a significant deviation from market expectations, leaving those betting on rising U.S. copper prices with all their efforts wasted.

Nevertheless, Goldman Sachs analysts believe this will not change the market fundamentals and do not expect a large-scale diversion in the U.S. They maintain the view that Comex prices should at least be on par with LME prices.

Bears Bet on "Lottery Tickets" Cashing In

For traders who do not believe Trump will follow through on his tariff threats, this is a huge victory.

Data from the options market vividly reflects this reversal. As of Tuesday evening, only 675 put option contracts were in the money (meaning the options could be exercised profitably), with a nominal value of $94.4 million.

After the exemption news was announced, the number of profitable put option contracts exceeded 31,000, with a capital scale of up to $3.54 billion. Phil Streible, chief market strategist at Blue Line Futures LLC, commented:

This is amazing—these 'lottery tickets' have cashed in.

The veteran with over twenty years of experience in copper options and futures trading stated:

All the tariffs and many policies we see are essentially very unstable, and extreme outcomes can occur on both sides of the trade.

Reportedly, in Washington, a wide range of lobbying activities involving U.S. copper producers, semi-finished product manufacturers, scrap yards, and foreign governments have ultimately influenced the direction of policy.

It is worth noting that the prospect of import tariffs on refined copper has not completely disappeared. The U.S. Department of Commerce has suggested delaying the imposition of tariffs, starting with a 15% tariff in 2027 and increasing it to 30% by 2028. Trump has instructed the department to provide an update on the U.S. copper market by the end of June 2026