US President Trump’s announcement of a 50% import tariff on copper has shaken the market. The price of copper on Comex rose to nearly 590 US cents per pound, which is about $13,000 per ton. Meanwhile, prices on the London Metal Exchange (LME) dropped, creating a 30% premium in the US compared to global prices. These high tariffs are likely to tighten US copper supply. Last year, the US imported 45% of its copper, with 65% of those imports coming from Chile. This situation makes it challenging to almost double domestic production in a short time. Additionally, secondary production only adds a small 4% to US copper output.

Projected Market Changes

The new tariffs are expected to lower the demand for copper in the US. The aluminum sector is also anticipating similar effects, which may increase copper availability outside the US, thus impacting LME prices. Many may rush to import copper before the August 1 deadline, possibly boosting LME prices initially. However, forecasts predict a decline to $9,500 per ton once tariffs take effect. There are risks with these market changes. It’s important to do thorough research before making investments. Be aware of the risks, uncertainties, and potential losses involved in market activities. This situation is a clear example of how policy changes can impact commodity markets. With the announcement of steep tariffs on copper, the market felt an immediate impact. The Comex price spiked, but LME prices fell, resulting in a 30% price difference. This isn’t just theory. The US relied on imports for almost half of its copper usage last year, predominantly from Chile. Once the tariffs are enforced in August, supply could become very tight. Domestic production isn’t going to increase quickly, and secondary production is minimal, leaving the US in a tricky position.

Impact on Supply and Demand

We expect tighter copper supply in the US will push domestic prices higher while lowering global benchmarks. The aluminum market may also face similar shifts, freeing up more copper for international buyers and likely depressing LME prices over time. Leading up to August 1, companies might ramp up imports, temporarily increasing LME copper prices, but this won’t last. Once the tariffs are fully in place, projections suggest prices will fall to $9,500 per ton. Volatility is returning. For traders, this could mean larger spreads and greater price differences. While arbitrage opportunities might look appealing, they will be short-lived. Pricing mechanisms are changing rapidly, and swift execution is vital. These developments resemble past supply-driven policies and highlight the global consequences of US decisions. Being conscious of timing is crucial now, especially regarding futures contracts for deliveries post-August. There could be less liquidity in contracts most affected by US delivery, which might widen bid-offer spreads. Short-term mismatches between physical and paper contracts often happen in policy-driven environments. Traders adjusting to new pricing structures, especially regarding funding and collateral needs, are also advised to stay cautious. Margin requirements may change as volatility drives risk higher. Monitoring metal flows and warehouse inventories in the coming weeks will provide clearer insights. LME inventories might increase slightly as supply adjusts. However, if physical shipments are redirected too quickly, this could lead to unexpected supply shortages in Asia and Europe. With any significant change, timing is critical. Premature moves, betting on price equality returning across exchanges, could backfire. Those who remain focused on actual customs schedules, rather than just shipping volumes, will likely benefit. This situation is no longer just about copper. The effects will spill over into other metals, particularly those involved in shared refining processes or multi-commodity contracts. Contracts for physical delivery, especially in the Gulf Coast, may show unforeseen disparities. We have entered a phase where relative value strategies might outperform direct price bets. Any new political developments or hints at countermeasures from large exporters could add more unpredictability. Keeping an eye on shipping delays, storage demand, and insurance costs for high-tariff cargo will provide operational insights. What’s needed now is discipline—active monitoring and hedging strategies. Cross-market correlations remain unstable. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now