US Commerce Secretary Howard Lutnick announced that 15 to 20 letters will be released soon. He mentioned possible copper tariffs in late July or August and plans for trade talks with China with US Treasury and Trade representatives in early August. A trade war occurs when countries implement strict measures like tariffs, which increase import costs. The US-China trade conflict started in 2018 when the US imposed tariffs on Chinese goods, leading China to respond similarly. Although a Phase One deal in 2020 aimed to reduce tensions, many tariffs remain.

Trump’s Return and Trade Tensions

With Donald Trump running for president again, we expect increased tensions with China. Trump has vowed to implement a 60% tariff on Chinese goods during his 2024 campaign. This renewed trade war impacts global economies and supply chains, affecting spending and contributing to inflation. This information contains forward-looking statements and is not investment advice. It’s essential to do thorough research before making any financial choices. The authors express personal views and are not registered investment advisors, so they take no responsibility for reliance on this information. Lutnick’s statements hint at numerous official notifications likely aimed at specific trade partners. We see this as a first step before broader trade policy changes. Although these letters might initially carry only diplomatic significance, they signal a shift in Washington’s trade stance, particularly regarding copper—an essential material in industrial supply chains. The mention of potential tariffs on copper this summer suggests timing that may align with changes in commodity market liquidity and pricing for tech and energy companies. Additionally, the announcement of high-level discussions with Chinese officials this August indicates alignment within US fiscal and trade agencies. This sets the stage for a thoughtful policy adjustment rather than abrupt changes, but history shows that these talks seldom happen without administrative strategies in place. The 2018-2020 period serves as a reminder: the tariffs then triggered reactions that went beyond expectations, often catching experienced market players off guard. Many assets experienced volatility not directly tied to market fundamentals but rather to political timing and regulatory uncertainties.

Metals Market Impact and Global Responses

We anticipate various pressure points will emerge once these letters are released. Traders focusing on the relationship between equity volatility and metals might see unforeseen changes. For trades involving copper and related assets—like aluminium or rare earth contracts—hedging costs could rise, especially if the letters contain detailed product information or suggest retroactive policies. Speculation about tariffs isn’t new, but Trump’s return to the presidency adds real risk. His plan to impose a 60% tariff on Chinese imports frames the market in terms of “when” rather than “if”—and more crucially, “how much.” Institutions will likely start factoring these expectations into their pricing sooner than some may think. This involves not just the direct effects of tariffs, but also anticipatory actions—like purchasing beforehand, stockpiling, or altering supply chains—that take place even before any laws are enacted. It’s important to view early summer as a time for expectations to solidify. In previous years, we’ve seen how miners, freight operators, and manufacturers react to even subtle regulatory hints. For derivatives markets, opportunities will arise from monitoring shifts in margins and implied volatility related to commodity-focused companies. For instance, the gap between futures and spot prices in metals ETFs could widen if tariff concerns start affecting overnight rates or dollar-based calculations. Another key issue is how other trading partners will react. In past instances, retaliatory measures have come faster than analysis predicted. For example, Canada and the EU quickly implemented retaliatory tariffs on selected US goods. This isn’t just past history; it sets a precedent. For anyone engaged in synthetic exposure to global trade patterns through FX options or cross-border indices, it’s crucial to keep a close watch. We don’t expect a repeat of the exact events of 2018. However, the familiar structure is there: public letters, economic signals, international meetings, and gradually increasing tariffs. Traders can no longer count on a stable trade backdrop for Q3. Adjustments to models may need to include the upcoming tariffs and shifts in implied risk—and especially for sectors like tech, mining, and industrials. As always, this information should not be taken as direct advice but as context to consider. Data can be volatile, sentiment often shifts quickly, and markets move rapidly once policy changes are anticipated. We have seen this cycle unfold before. Create your live VT Markets account and start trading now.

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