Copper prices rose sharply this week after the U.S. government initiated an investigation into potential tariffs on imported copper. The move, directed by President Donald Trump, is part of a broader strategy to impose sector-specific trade restrictions aimed at bolstering domestic production.
The U.S. Commerce Department has been tasked with examining the impact of copper imports under Section 232 of the Trade Expansion Act. This provision grants the president authority to impose trade restrictions on national security grounds. The department has up to 270 days to complete the investigation and submit recommendations.
Following the announcement, copper futures on the Comex exchange in New York climbed as much as 4.9%. As of 9:29 a.m. Shanghai time, Comex copper was trading at $4.746 per pound, reflecting a 4.8% increase. London Metal Exchange copper futures also rose, gaining 1%. The rise in copper prices coincided with an increase in the stock prices of U.S.-based copper mining companies. Freeport-McMoRan Inc., a major copper producer, saw its shares jump more than 6% in after-market trading.
This investigation follows similar trade measures recently enacted by the Trump administration. The president had previously announced plans to impose a 25% tariff on all imports of steel and aluminum starting March 12. Those tariffs expanded upon actions taken during Trump’s first term, when Section 232 was used to justify trade restrictions on metals.
The potential tariffs on copper have already caused significant disruptions in global markets. Traders anticipate a widening gap between copper prices in the U.S. and those in other regions as a result of the proposed trade measures.
Meanwhile, global copper supply was further affected by a large-scale power outage in Chile, the world’s top copper producer. The blackout, the country’s largest in 15 years, impacted multiple industries, including mining. Codelco, Chile’s state-owned mining giant, confirmed that all of its operations were affected by the power failure.
The developments surrounding U.S. trade policy and global supply disruptions have introduced new volatility to copper markets. Analysts are closely monitoring the ongoing investigation and potential policy changes, which could have far-reaching effects on copper prices and supply chains worldwide.
Economically, tariffs are designed to protect domestic industries by increasing the cost of imported goods. In the case of copper, this could bolster U.S. copper production, which is crucial for manufacturing electric vehicles, ships, and data centers, as well as for military hardware and advanced technologies like AI. However, these tariffs could also lead to increased costs for industries reliant on copper, such as construction and automotive manufacturing, potentially affecting consumer prices and economic growth.
Strategically, the move aligns with Trump’s broader trade policies aimed at reducing reliance on foreign suppliers, particularly China, which has been accused of unfair trade practices. The investigation under Section 232 of the Trade Expansion Act allows the president to impose tariffs on national security grounds, a strategy previously used for steel and aluminum. This approach could lead to trade tensions with major copper suppliers like Chile, Canada, and Mexico, potentially disrupting global supply chains and affecting international relations
The recent surge in copper prices, partly driven by the U.S. tariff investigation and exacerbated by the Chilean power outage, highlights the complex dynamics of global copper markets. Chile’s role as the world’s largest copper producer means that any disruptions there can significantly impact global supply and prices.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.
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