President Trump’s threat to impose 50% tariffs on copper (HG=F) roiled the market, with futures for the industrial metal stepping back from record highs Wednesday as industry insiders digested the potential impact.
“It’s a crapshoot right now,” American Pacific Mining (USGDF) co-founder Eric Saderholm said. “He’s trying to get people to the [negotiating] table to a deal, but he’s throwing the markets into a big tizzy right now because the price is artificially high.”
On Wednesday, copper futures fell 3% after rising over $5.60 per pound in the prior session.
Copper imports have surged to record levels as importers rush to get ahead of the proposed tariffs. JPMorgan analysts said the US has brought in nearly a year’s worth of copper from abroad over the past six months. The rush follows a February executive order that designated copper a critical national security material, prompting a Commerce Department investigation into whether imports threaten domestic supply chains.
“The surging demand for US copper ahead of the looming tariffs has pushed domestic prices to a 25% premium over copper trading on the London Metal Exchange (LME),” Adam Turnquist, chief technical strategist at LPL Financial, wrote in a note Wednesday.
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“Furthermore, LME copper inventories have been significantly depleted, raising concerns about a global supply shortage outside the US,” he added.
In the short term, analysts expect imports to keep rising.
“Given the increased risk of a 50% tariff, we expect a further acceleration in shipments into the U.S. in the coming weeks,” Goldman Sachs analysts said in a note Wednesday morning.
The analysts noted that while Trump’s comment on copper tariffs during a wide-ranging Cabinet meeting appeared improvised, the short timeline to implementation increases the likelihood that the full 50% rate will be enacted.
“Accordingly, we revise our baseline expectation to a 50% tariff on U.S. copper imports, up from 25% previously. That said, this higher rate may ultimately serve as a negotiating anchor, followed by exemptions or concessions,” Goldman Sachs analysts said.
Industry experts say the US currently imports about 50% of the copper it needs for use across an array of industries, from construction to autos to data centers.
The United States’ need for copper imports stems from a lack of necessary facilities to process and recycle enough of the metal domestically to meet demand. Saderholm said the US needs to invest in more infrastructure to produce more copper internally.
