As expected, US President Trump's announcement of 50% import tariffs on Copper has led to turmoil on the affected market. The price of Copper traded on Comex rose to a peak of almost 590 US cents per pound (equivalent to $13,000 per ton). The price on the London Metal Exchange, on the other hand, came under pressure, with the US price now trading at a premium of almost 30% to the LME price, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

High tariffs on Aluminium may lead to demand destruction

"The divergence in prices can be explained by the assumption that US Copper supply will become scarcer due to the prohibitively high tariffs. According to the USGS, the US imported 45% of its Copper consumption last year, with Chile being the primary source of refined Copper, accounting for 65% of imports. The US would therefore have to virtually double its domestic production. This is unlikely to be possible in such a short time. Switching to secondary production is also likely to be difficult, as this currently accounts for a negligible 4% of US Copper production (based on USGS data for 2024)."

"The tariffs are therefore highly likely to lead to a decline in US Copper demand. A US Aluminium association had also warned that the equally high tariffs on Aluminium would most likely lead to demand destruction. Lower US imports would in turn increase the supply of Copper outside the US, which explains why the price on the LME is under pressure. However, the market is anticipating this development."

"In the short term, US companies are likely to try to ship as much Copper as possible to the US before the 1 August deadline. The reduction in inventories on the LME and SHFE could therefore pick up speed again and support the LME Copper price, at least temporarily. However, a countermovement is to be expected from 1 August at the latest, when the tariffs take effect. We therefore expect the Copper price on the LME to fall further to $9,500 per ton."