The Global Impact Of Trump’s Copper Tariff

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What impact will a 50% US copper tariff have on copper prices and Australian copper producers?

-Trump imposes 50% US import tariff on copper, mirroring aluminium and steel
-US-based prices surge above ex-US prices
-Could the US ever produce enough of its own copper?
-Which Australian producers will be impacted?

By Greg Peel

President Trump reportedly said in a cabinet meeting on July 7 that he would put a new 50% tariff on US copper imports, following a section 232 investigation launched in February. A Section 232 investigation is conducted to determine the effect of imports on US national security.

The Secretary’s report to the President, prepared within 270 days of initiation, focuses on whether the importation of the article in question is in such quantities or under such circumstances as to threaten to impair national security. A period of 270 days suggests a decision would be made after nine months, but this was not the case for steel and aluminium.

Steel and aluminium copped almost immediate 25% tariffs, since increased to 50%. While the White House has not officially set a date for copper tariffs to be imposed, Commerce Secretary Lutnick has implied the end of July.

How Much Copper Does the US Need?

The US is a large copper importer, Morgan Stanley notes, with net imports accounting for around 53% of its requirements in 2024. Domestic production of around 85kt is far outweighed by more than 1.4mt of imports (partly offset by exports), and this would be the first time copper has faced tariffs into the US.

Major copper exporters to the US include Canada, Mexico and Chile. Tariffs on Canada and Mexico remain somewhat fluid, having previously been set at 25%, with some exemptions in Canada’s case (such as energy), but Trump has since announced a 35% tariff on “all” goods imported from Canada as a penalty against the flood of fentanyl streaming into the country, despite reports more fentanyl flows from the US to Canada than the other way around.

Chile was initially hit with a 10% Liberation Day tariff, with no further update since (presumably a “letter” has been sent). Chile is responsible for nearly a quarter of global copper supply, which contributes 10-15% to Chile’s GDP. In 2023, China accounted for 56% of Chile’s exports, followed by the US with 11% and Japan with 8.5%.

The intention of the tariff –any tariff– is to bring manufacturing/production back to the US. Never mind the US simply does not or cannot produce certain commodities. For example, most US coffee comes from Brazil (new 50% tariff) and none is produced domestically (aside from a negligible amount in Hawaii). Never mind also the likes of bananas or avocados.

UBS notes to increase US domestic copper production to a level of self-sufficiency would require increased primary (mined) supply and increased secondary (scrap) supply. The latter would occur via reduced scrap exports along with increased domestic smelting and refining capacity. Stability and certainty surrounding trade/tariff policies and resultant fiscal conditions are necessary conditions for industry to respond.

Given high capital intensity and long lead times for projects (mining or smelting) versus limited certainty on the duration of tariff benefits, in UBS’ view a material increase in investment is unlikely.

Even under ideal conditions, UBS suggests requisite sufficient supply to balance US copper trade is three to five years away, at a minimum.

The Impact

Citi believes this is a watershed moment for the copper market in 2025 as imminent flagged tariff implementation should abruptly close the window for further significant US-bound copper shipments, possibly for the rest of 2025. This should catalyse a pullback in ex-US pricing to US$8,800/t on a 0-3 month view.

The current price paid in London is around US$9,600/tonne.

Following the July 7 announcement, the US Commodities Exchange (Comex) to London Metals Exchange (LME) copper spread was 30%, having traded well above historical averages of a few percentage points since Trump’s inauguration day. This reflects a surge in US demand for US copper over imported copper.

UBS suspects the market will want more detail of copper product coverage and is likely to discount some negotiated lower tariff (TACO) and the analysts judge it still early to be settling on an expected Comex- LME spread resulting from US tariffs.

Morgan Stanley points out so far there are no details on whether this would apply to all copper products (eg would scrap imports be excluded, as they are for aluminium?), or the exact implementation date. A 50% tariff would also add some US$5,000/t or US$2.25/lb to US copper prices, which would bring risks of demand destruction with Comex copper now at an all-time high.

There are also questions around whether there would be any exemptions, eg Chile exported over 2mt of refined copper in 2024, and so could in theory fully supply the US, at least for its refined copper needs.

Following Trump’s inauguration day, US importers of pretty much everything went on a spending spree, front-loading orders in the March quarter even before Liberation Day on Trump’s campaign promise of tariffs to come. When separate tariffs were placed on aluminium and steel, it was assumed copper would be next, and hence imports of copper, too, have been front-loaded.

Citi believes the market will substantially discount the 50% rate both due to expectations around exemptions (seeing Chile, Canada and Mexico likely all eventually securing a lower 25% rate as key partners and US copper import sources) and because of the excess US copper imports through the first half of 2025.

Drawdowns of the accumulated excess of US-based copper have the potential to completely displace US refined copper import requirements for the remainder of 2025, Citi suggests, which is bearish for LME, bullish for Comex.

Data suggest year-to-date seaborne refined copper imports to the US are already equal to 2024 volumes (around 400kt of “extra” copper on Morgan Stanley’s estimates). This has tightened ex-US markets, drawing down inventories and supporting LME prices and time spreads. However, once a tariff is in place, this “extra” buying should fade, and US imports may even undershoot normal levels, as onshore inventories brought in at a lower price are prioritised.

Morgan Stanley estimates the extra refined metal purchases should cover about six months of imports to run down. The implementation date of tariffs matters too. If they come into effect in three weeks, shipments already on route to the US will likely try to get there still, meaning the ex-US markets shouldn’t face excess cargoes immediately, but it will be more challenging to ship any extra cargoes in a three-week window, loosening ex-US markets going forward.

Locally, UBS notes Rio Tinto ((RIO)) likely benefits from its US-based Kennecott Copper Business (albeit only a modest contributor to earnings) but others under coverage, including BHP Group ((BHP)), South32 ((S32)), Sandfire Resources ((SFR)) and Evolution Mining ((EVN)) are likely to face near-term headwinds from softer LME pricing short term.

The bulk of BHP’s and Rio’s copper production is in Chile, where both own respectively 57.5% and 30% of the world’s largest copper mine, Minera Escondida. Both also have smaller operations in the country.

More to Come?

The extension of a 50% import tariff rate to copper, mirroring steel and aluminium tariffs, raises the odds a 50% levy (or higher) will be applied to other metals and minerals imports following the ongoing Critical Minerals section 232 investigation, Citi warns.

An interim critical minerals section 232 investigation report is due by July 14, with no less than 51 metals and minerals in scope, including zinc, nickel, tin, palladium, platinum and lithium.

Citi suggests clarity on specific metals that may be targeted by tariffs has the potential to drive a rush of shipments of those metals to the US as well as significant upside for US physical premiums.

Co-dependencies between in-scope metals could help shape policy, with zinc refining a significant source of germanium, for example.

Or maybe there’ll be a pause.

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