Trump's copper tariffs are "much ado about nothing", US copper prices plummeted 18%, and the market exclaimed that it was unexpected!
2025-07-31 09:19:33
US President Trump's announcement of a 50% tariff on copper pipes and wire sent shockwaves through the global copper market. However, the tariff's scope was surprisingly narrower than expected, omitting raw materials like copper ore, concentrate, and cathode. This also caused US copper prices on the New York Mercantile Exchange (COMEX) to plummet by over 18% on Wednesday, July 30th. This dramatic turn of events caught the market off guard and introduced new uncertainties into the global copper trade landscape.
Market expectations were dashed and copper prices collapsed instantly
Since Trump first mentioned imposing copper tariffs in early July, the market generally expected the policy to cover the entire copper supply chain, from copper ore to refined copper and even copper products. Investors and analysts speculated that comprehensive tariff barriers would drive up domestic copper prices in the United States and have far-reaching impacts on the global copper market. However, the Trump administration's announcement on July 30th unexpectedly watered down the scope: the tariffs would only apply to semi-finished products such as copper pipes and wire, as well as some electronic components and wiring products that use copper. Key raw materials such as copper ore, copper concentrate, and cathode copper were excluded.
This policy's precise impact directly caused US copper prices on the COMEX market to plummet by over 18%, hitting a low of $4.50 per pound, the lowest level since May 9th, completely shattering market expectations of a US copper premium. Previously, anticipating higher domestic prices due to tariffs, a large amount of copper cargo was diverted to the US, but now the market is forced to recalibrate its pricing logic. Tom Price, an analyst at the London brokerage firm Panmure Liberum, pointedly noted, "Trump's significant concessions on tariffs have forced the market to readjust refined copper prices to lower levels."
The “clear” considerations behind the policy
Industry insiders generally believe that this unexpected policy shift stems from Trump's last-minute realization of the potential devastating impact of comprehensive tariffs on the US economy. Tom Price further analyzed, "Someone must have made it clear to Trump that the US economy could not withstand this new trade blow." High copper prices would not only drive up manufacturing costs but also potentially trigger inflationary pressures, impacting the daily lives of American consumers. Therefore, the Trump administration opted for a compromise, attempting to strike a balance between protecting domestic industry and avoiding economic shocks.
US copper companies are under pressure, with Freeport bearing the brunt
Trump's tariffs have had a mixed impact on the US copper mining industry. While intended to protect US manufacturing, the tariffs offer limited support to the sector. RBC Capital Markets notes that Freeport-McMoRan (FCX.N), the largest US copper producer, could be one of the biggest casualties. Furthermore, companies developing US mines, such as Hudbay Minerals (HBM.TO) and Arizona Sonoran (ASCU.TO), will also face adverse effects. These companies have been calling for reforms from Washington to stimulate growth in the copper mining industry for years, but the limited scope of these tariffs clearly falls short of their expectations.
Freeport-McMoRan said it would make a formal comment after studying Trump's order in detail. The market generally believes that the exclusion of raw materials from tariffs will weaken the competitiveness of US copper mining companies, as imported low-cost raw materials will continue to put pressure on the domestic market.
Chile and Peru unexpectedly win
In stark contrast to the plight of US copper companies, Chile and Peru, two major global copper mining nations, have emerged as unexpected beneficiaries of this policy. As major suppliers of refined copper to the US, their copper ore, concentrate, and cathode products have been exempted from the tariffs. Chile's state-owned copper company, Codelco, welcomed the move, stating that the exclusion of cathode copper is a significant benefit to both the company and the Chilean economy. As the world's largest copper producer, Chile is expected to further expand its market share in the US.
Natalie Scott-Gray, an analyst at consulting group StoneX, said the tariff details were a "huge surprise to the market" and predicted that U.S. copper prices could fall further. Anant Jatia, founder of hedge fund Greenland Investment Management, noted that as U.S. copper inventories increase, the London copper price (CMCU3) could surpass the U.S. copper price (HGc2) in the short term, further reshaping the global copper price landscape.
The Causes and Consequences of Section 232 Investigations
Trump's copper tariffs stem from an investigation launched in February of this year under Section 232 of the Trade Expansion Act of 1962. This provision allows the US government to impose tariffs on imported goods on national security grounds. US Commerce Secretary Howard Lutnick submitted the investigation report to the White House on June 30th, and Trump subsequently announced the tariffs based on it. In his announcement, Trump emphasized that "copper imports into the United States in such quantities and under such circumstances could potentially impair the national security of the United States." However, the reduction in the scope of the tariffs demonstrates the administration's careful balance between national security and economic stability.
'Potential threat' of future tariffs
While the current tariffs are limited in scope, Trump has indicated that further expansion is possible. He has asked Commerce Secretary Lutnick to submit an updated report on the domestic copper market by June 2026. Based on the report's findings, Trump will assess whether to implement a general 15% import tariff on refined copper starting in 2027, with a further increase to 30% in 2028. This "phased" tariff plan has added new uncertainty to the market, forcing investors and businesses to closely monitor subsequent policy developments.
In addition, Trump's order also requires that 25% of high-quality copper scrap produced in the United States must be sold domestically to support the domestic copper industry. Although this measure is intended to boost the domestic market, its actual effect remains to be seen.
Trump's unexpectedly mild copper tariff policy has triggered significant volatility in the global copper market. A 17% plunge in US copper prices not only shattered market expectations of high tariffs but also provided unexpected benefits to major copper suppliers like Chile and Peru. However, this policy's support for the US copper mining industry is far from sufficient, potentially increasing competitive pressure for companies like Freeport. With the Trump administration potentially adjusting tariffs further, the global copper market will remain in a state of constant flux. Investors, manufacturers, and consumers alike need to closely monitor the far-reaching implications of this policy.
(Daily chart of the main COMEX copper futures contract, source: Yihuitong)
At 09:18 Beijing time, the main contract of COMEX copper futures was quoted at US$4.5160 per pound.
Trump's tariff policy takes an unexpected turn
Market expectations were dashed and copper prices collapsed instantly
Since Trump first mentioned imposing copper tariffs in early July, the market generally expected the policy to cover the entire copper supply chain, from copper ore to refined copper and even copper products. Investors and analysts speculated that comprehensive tariff barriers would drive up domestic copper prices in the United States and have far-reaching impacts on the global copper market. However, the Trump administration's announcement on July 30th unexpectedly watered down the scope: the tariffs would only apply to semi-finished products such as copper pipes and wire, as well as some electronic components and wiring products that use copper. Key raw materials such as copper ore, copper concentrate, and cathode copper were excluded.
This policy's precise impact directly caused US copper prices on the COMEX market to plummet by over 18%, hitting a low of $4.50 per pound, the lowest level since May 9th, completely shattering market expectations of a US copper premium. Previously, anticipating higher domestic prices due to tariffs, a large amount of copper cargo was diverted to the US, but now the market is forced to recalibrate its pricing logic. Tom Price, an analyst at the London brokerage firm Panmure Liberum, pointedly noted, "Trump's significant concessions on tariffs have forced the market to readjust refined copper prices to lower levels."
The “clear” considerations behind the policy
Industry insiders generally believe that this unexpected policy shift stems from Trump's last-minute realization of the potential devastating impact of comprehensive tariffs on the US economy. Tom Price further analyzed, "Someone must have made it clear to Trump that the US economy could not withstand this new trade blow." High copper prices would not only drive up manufacturing costs but also potentially trigger inflationary pressures, impacting the daily lives of American consumers. Therefore, the Trump administration opted for a compromise, attempting to strike a balance between protecting domestic industry and avoiding economic shocks.
The chain reaction in the global copper market
US copper companies are under pressure, with Freeport bearing the brunt
Trump's tariffs have had a mixed impact on the US copper mining industry. While intended to protect US manufacturing, the tariffs offer limited support to the sector. RBC Capital Markets notes that Freeport-McMoRan (FCX.N), the largest US copper producer, could be one of the biggest casualties. Furthermore, companies developing US mines, such as Hudbay Minerals (HBM.TO) and Arizona Sonoran (ASCU.TO), will also face adverse effects. These companies have been calling for reforms from Washington to stimulate growth in the copper mining industry for years, but the limited scope of these tariffs clearly falls short of their expectations.
Freeport-McMoRan said it would make a formal comment after studying Trump's order in detail. The market generally believes that the exclusion of raw materials from tariffs will weaken the competitiveness of US copper mining companies, as imported low-cost raw materials will continue to put pressure on the domestic market.
Chile and Peru unexpectedly win
In stark contrast to the plight of US copper companies, Chile and Peru, two major global copper mining nations, have emerged as unexpected beneficiaries of this policy. As major suppliers of refined copper to the US, their copper ore, concentrate, and cathode products have been exempted from the tariffs. Chile's state-owned copper company, Codelco, welcomed the move, stating that the exclusion of cathode copper is a significant benefit to both the company and the Chilean economy. As the world's largest copper producer, Chile is expected to further expand its market share in the US.
Natalie Scott-Gray, an analyst at consulting group StoneX, said the tariff details were a "huge surprise to the market" and predicted that U.S. copper prices could fall further. Anant Jatia, founder of hedge fund Greenland Investment Management, noted that as U.S. copper inventories increase, the London copper price (CMCU3) could surpass the U.S. copper price (HGc2) in the short term, further reshaping the global copper price landscape.
Policy Background and Future Outlook
The Causes and Consequences of Section 232 Investigations
Trump's copper tariffs stem from an investigation launched in February of this year under Section 232 of the Trade Expansion Act of 1962. This provision allows the US government to impose tariffs on imported goods on national security grounds. US Commerce Secretary Howard Lutnick submitted the investigation report to the White House on June 30th, and Trump subsequently announced the tariffs based on it. In his announcement, Trump emphasized that "copper imports into the United States in such quantities and under such circumstances could potentially impair the national security of the United States." However, the reduction in the scope of the tariffs demonstrates the administration's careful balance between national security and economic stability.
'Potential threat' of future tariffs
While the current tariffs are limited in scope, Trump has indicated that further expansion is possible. He has asked Commerce Secretary Lutnick to submit an updated report on the domestic copper market by June 2026. Based on the report's findings, Trump will assess whether to implement a general 15% import tariff on refined copper starting in 2027, with a further increase to 30% in 2028. This "phased" tariff plan has added new uncertainty to the market, forcing investors and businesses to closely monitor subsequent policy developments.
In addition, Trump's order also requires that 25% of high-quality copper scrap produced in the United States must be sold domestically to support the domestic copper industry. Although this measure is intended to boost the domestic market, its actual effect remains to be seen.
Summary: “Changes” and “Opportunities” in the Copper Market
Trump's unexpectedly mild copper tariff policy has triggered significant volatility in the global copper market. A 17% plunge in US copper prices not only shattered market expectations of high tariffs but also provided unexpected benefits to major copper suppliers like Chile and Peru. However, this policy's support for the US copper mining industry is far from sufficient, potentially increasing competitive pressure for companies like Freeport. With the Trump administration potentially adjusting tariffs further, the global copper market will remain in a state of constant flux. Investors, manufacturers, and consumers alike need to closely monitor the far-reaching implications of this policy.
(Daily chart of the main COMEX copper futures contract, source: Yihuitong)
At 09:18 Beijing time, the main contract of COMEX copper futures was quoted at US$4.5160 per pound.
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