US 50% Copper Import Tariff to Come into Effect by This Weekend; Chile Actively Pursuing Exemption
StoneX Financial APP has learned that the US plans to impose a 50% tariff on copper imports as early as this weekend, although the policy trajectory remains uncertain. With Chile actively pursuing an exemption and the concept of a "metal alliance" between the US and Europe gaining momentum, the future of copper prices and global metal trade may be subject to significant changes.
On July 8th, the Trump administration announced its plan to impose a copper tariff, sparking a market reaction that sent copper prices soaring by 13% on that day, reaching a historic high of $5.6855 per pound since 1968. On July 23rd, copper prices further rose to a new high of $5.82 per pound, despite experiencing a three-day correction, and as of Tuesday, it had rebounded slightly to $5.63 per pound.
Copper is widely used in various fields such as construction and electronics, and its price volatility is closely related to inflation. This round of increase has raised concerns about the transmission of costs and pressure on prices.
Natalie Scott-Gray, a senior analyst at StoneX Metals, notes that the market currently feels "tariff fatigue" and expects the possibility of national exemptions. She believes that if the US announces certain countries' exemptions, such as Chile's, on August 1st when it imposes the copper tariff, it may lead to a significant narrowing of the arbitrage space between COMEX and LME.
Chilean Finance Minister Mario Marcel has already expressed his efforts to push for an exemption. Analysts believe that Chile is being "special treated" not only because of its dominant position in US copper supplies but also due to the trade surplus between the two countries.
Currently, the COMEX September copper contract price is around $5.63 per pound, while the LME three-month copper price is equivalent to around $4.44 per pound, with a significant arbitrage space opened up.
If no national exemptions appear and the tariff takes full effect, StoneX expects the arbitrage gap to further expand, with US copper prices maintaining high levels in the medium term. The US imports around 44% of its copper, which means that any supply disruption could further push up prices.
Meanwhile, LME copper prices may face downward pressure due to high tariffs potentially weakening demand for US markets and causing global inventory to flow back into LME warehouses, with the price curve further widening.
In anticipation of tariffs, US copper importers have already taken a "pre-emptive strike." Morgan Stanley notes that US copper imports surged by 129% in the first half of this year, leading to inventory buildup. StoneX also states that some copper shipments are currently waiting outside US waters for optimal entry timing.
Morgan Stanley's Gregory Shearer points out that the "pre-emptive purchasing" by the US and other countries has exacerbated global supply imbalances. Although global copper supplies remain tight, inventory distribution is extremely uneven. He expects the effects of this "advance drawdown" to gradually unwind by the second half of 2025, putting pressure on copper prices throughout the year.
He also notes that as copper flows are redistributed to other regions, LME inventory will be replenished, and arbitrage space will expand, exerting continued downward pressure on LME copper prices.
Morgan Stanley's Global Research Department predicts that as the tariff policy becomes clearer, the arbitrage space between COMEX and LME copper prices may expand to around 50%, with COMEX prices remaining higher and LME prices falling back.
Meanwhile, Europe is also seeking exemptions from US steel, aluminum, and copper tariffs. EU Trade Commissioner Maros Sefcovic recently stated that the EU-US trade agreement is moving towards establishing a "metal alliance" framework, aiming to establish a "common protection circle" through a mechanism combining historical quotas and preferential treatment.
According to StoneX, under this "metal alliance" framework, European steel and aluminum exports will be subject to certain duty-free quotas, with duties applied outside these quotas. The current quota system is not yet finalized. As for copper and wood products, the US is still assessing its 232 investigation findings, with expected tariffs not exceeding 15%.
RJO Futures Senior Strategy John Caruso notes that even without tariffs, copper remains in a long-term bull market cycle. "We are currently in a hot spot for AI data center expansion, and some individual data centers' copper demand can reach up to 2177 tons," he says, noting that the current global grid upgrade, electrification process, and widespread adoption of AI technology have created an almost limitless demand for copper, with supply and demand imbalances expected to persist in the long term.