Copper prices have taken a significant hit after new tariffs on certain copper products have been announced. The price dropped by $1.22, which is a 21.89% decline, marking one of the worst days since 2015. President Trump’s new tariffs, set at 50%, target semi-finished copper products and derivatives. These tariffs will be effective starting August 1, 2025. Notably, refined copper, ores, concentrates, mattes, and scrap copper are not included in these tariffs. The items affected include pipes, wires, rods, sheets, and copper-heavy products like pipe fittings and electrical components. The goal of these tariffs is to strengthen the domestic copper industry by requiring the sale of US-produced copper scrap within the country. The exclusion of refined copper from these tariffs led to a sharp drop in US copper futures. This surprised many in the market, as they had expected a wider range of products to face tariffs. There is also talk of potential future tariffs on refined copper—15% by 2027 and 30% by 2028. Copper trading has fallen below important moving averages, with support levels between $3.92 and $4.02. If prices continue to drop, it may signal further bearish market trends. This unexpected decision to exclude refined copper from tariffs has changed trade predictions and affected copper prices globally. With copper prices dropping over 21% today, the market was clearly caught off guard by the refined copper exclusion. Implied volatility on copper options has surged, with front-month contracts reaching over 45%, a level not seen since the market shocks of 2022. This high volatility could present opportunities for those ready to navigate price swings in the coming weeks. The new rules, effective tomorrow, are expected to increase US imports of refined copper cathodes as manufacturers rush to avoid significant tariffs on finished pipes and wires. We expect a buildup of raw copper in US warehouses, which will likely keep pressure on COMEX futures prices. June 2025 import data showed a 12% increase in refined copper imports year-over-year, and we anticipate this trend to accelerate. For futures traders, the easiest path is now downward, following a clear break below the 200-day moving average at $4.63. Any rally back toward this level might provide a good chance to enter new short positions. The next key downside target is the support zone between $3.92 and $4.02, a level that has held strong multiple times since 2024. Given the increased cost of options, buying puts directly is now pricey. A smarter strategy might be to sell out-of-the-money call spreads to collect the strong premiums, betting that prices stay below the $4.50-$4.60 range through August and September. This is a bearish approach that profits from both price stability and falling volatility. Another strategy involves a spread trade, going long on refined copper futures while shorting the stocks of US copper fabricators. These companies, which convert refined copper into finished products, are facing squeezed profit margins. We’ve already seen stocks like Encore Wire (WIRE) drop over 25% due to this news, and we expect this downward trend to continue.

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