"Column" imposes a 50% tariff on imported copper, the biggest "own goal" of Trump's trade war

(This article is authored by Clyde Russell, a columnist for Reuters, and the following content represents his personal views)

Reuters Launceston, July 10 - The plan to impose a 50% tariff on imported copper could become the biggest blunder in the trade war between U.S. President Trump and other countries around the world.

Trump announced the tariff on Wednesday, stating it would take effect on August 1.

Although Trump's statement seems quite clear, there is actually a lack of detailed explanation regarding which products will be included in the definition of copper, and whether major suppliers to the U.S., such as Chile and Canada, will have any exemptions or reduced rates.

However, even if some concessions are made before the implementation date, the final outcome is likely to be that the tariffs on copper imports will be much higher than before Trump regained power in January this year.

Like Trump's other tariffs, the motivation behind the copper tariff is to encourage more domestic mining and smelting of this industrial metal, which is a key metal for manufacturing electric vehicles, military hardware, semiconductors, and various consumer goods.

The problem for Trump's somewhat naive economic vision is that the reality of the U.S. copper market is that, both in the short term and long term, it is extremely difficult to achieve a meaningful boost in copper mining and processing.

The U.S. produces just over half of its annual copper demand, with refined copper imports expected to be 810,000 tons in 2024.

Copper miners such as Freeport-McMoRan Inc. (FCN.X) and Rio Tinto (RIO.AX) may ramp up production at existing mines to increase output, but this can only temporarily boost ore supply and is unlikely to be sustainable.

Importing copper ore and refining it is also unlikely, as reactivating idle smelting capacity requires time and funding. Additionally, some new mines are still in the planning stages.

Need for Imports

Meanwhile, the U.S. will continue to rely on copper imports, which means that copper buyers have limited options. They either pay the tariffs or reduce production to lower copper consumption.

This means that automakers, home builders, and electronics manufacturers may face higher costs, as domestic copper prices will rise to levels comparable to imported copper prices.

How these costs are absorbed or passed on will depend on the market power of the relevant companies, but if costs are passed on to consumers, the overall impact could be rising inflation; or if companies "eat the tariffs" as Trump suggests, then investment and employment will decrease.

The tariffs will also affect global copper pricing and trends in both the short and long term.

So far in 2025, the U.S. has absorbed a large amount of copper. This means that once the tariffs are implemented, U.S. imports could decline significantly, which may drag down global copper prices and reverse the upward trend in copper prices since Trump returned to the White House.

The benchmark London copper contract (CMCU3) closed at $9,630.50 per ton on Wednesday, up nearly 10% since the end of last year. The U.S. copper contract (HGc3) premium over the London copper contract rose from 13% before Trump's announcement to 26%.

The 26% premium is still far below the 50% tariff, which may indicate that the market is uncertain about which types of copper products will be subject to tariffs and whether tariffs for certain countries may be reduced However, once the final form of the copper tariff becomes clear and the existing inventory is depleted, U.S. copper prices are likely to rise to reflect the premium level of the tariff