The exclusion of raw material from US President Donald Trump’s 50% tariff on copper has quashed a major incentive for new US smelters and mines, crushed a US copper price premium and dashed hopes for lucrative domestic production profits.
Trump shocked markets in announcing on July 30 a 50% tariff that was far less broad than some expected. Markets had baked in some form of tariff on copper imports that included raw materials. Speculation over the tariff drove US spot prices as much as 28% higher than London Metal Exchange prices, drawing a flood of copper imports to the US in recent months.
But the scurry to get copper to the US was largely for naught. Trump targeted 51 specific semi-finished copper products, like insulated electric conductors and copper pipe fittings, according to a list in an annex accompanying a July 30 proclamation outlining the 50% copper tax. But the tariff excluded raw copper, the US’ primary copper import.
In the end, the Trump administration crafted a trade policy that hewed closely to what large copper producers and associations wanted, as described in comments they submitted to the government. The industry advised the US to back off raw materials or risk raising the cost of manufacturing in the US. The administration excluded raw materials to lessen the burden on manufacturers, a White House official told Platts on condition of anonymity.
Ahead of the proclamation, analysts and industry participants said a 50% tariff on raw materials would put pressure on US industry to expand production and, potentially, to build more mines and consider massive investments in new smelters.
“If that was the idea, that idea is gone,” said Joe Mazumdar, an analyst and editor at Exploration Insights who formerly worked in copper trading at Phelps Dodge, a company later acquired by Freeport-McMoRan.
Raw deal
The Trump copper tariff leaves most copper imports untouched. The top two targets of the new duty by value are types of insulated electric conductors. Together they comprised $7.37 billion worth of the targeted imports based on their 2024 import value. This was more than half the total value — $12.56 billion — of the targeted imports in 2024, according to an analysis of S&P Global Market Intelligence’s Global Trade Analytics Suite data.
The data comprised the 51 products listed as the targets of the 50% tariff at the 8-digit HTS code level in the proclamation’s annex, the White told Platts, part of S&P Global Commodity Insights, in an email.
Focusing on copper-specific products, the tariffed items accounted for $4.72 billion or 27.6% of the 2024 import value of all copper products, including raw materials. This excludes the value of the electric conductors. Imports of refined copper, not facing tariffs, were valued at $8.61 billion in 2024 or almost double the value of the tariffed copper products.
By market source, China accounted for 23.2% of the value of the targeted products in 2024, followed by Mexico at 19.5%.
In avoiding raw materials, the Trump administration looks to have come to the conclusion that taxing them would hurt manufacturers that depend on copper, David Harquail, chairman of streaming and royalty giant Franco-Nevada, said in an email.
Large US recycling, manufacturing and copper producer trade groups had largely advised against blanket tariffs on raw materials in April comments to the government amid the Trump administration’s national security probe into copper imports.
Meanwhile, Chile, the world’s top producer of copper, breathed a sigh of relief.
“The confidence regarding our country as a reliable partner, but also as a responsible producer, seems to us to be an important element to highlight,” Aurora Williams, Chile’s minister of mines, said July 30.
Dead arbitrage
The price of US-traded Comex copper futures dropped more than 20% after Trump’s announcement, largely evaporating a US price premium, analysts said.
“The COMEX-LME spread has collapsed since the announcement from $2,704 [per metric ton] on 29th July to $29/t in morning trading,” Natalie Scott-Gray, a senior metals demand analyst at financial firm StoneX, said in a July 31 note.
The LME spot copper price was $9,651.70/t on July 30, according to Commodity Insights data.
Trump’s willingness to leave copper raw materials alone ended a lucrative arbitrage trade that had emerged in the run-up to the announcement and left the market with an overhang of US inventories. US imports of copper roughly doubled this year as traders angled to profit from higher domestic prices and manufacturers looked to stock up on cheaper material ahead of the tariff.
Some of those stocks could now reverse course, relieving pressure on markets outside the US, where copper availability has become more scarce.
“That aggressive move of material to the Comex, combined with industry stockpiling — much of that bought more recently — is underwater price-wise,” David Davidson, an analyst at Paradigm Capital, told Platts. “Traders, I’m sure, are busy making calls helping their clients out. The same clients they stuffed with the metal over the past two months.”
Mining giant Freeport, which operates US mines and smelters, would have been one of the biggest winners had Trump slapped raw copper with a 50% duty. The 28% premium on US copper prices implied a $1.7 billion boost in annual cash flows, Kathleen Quirk, Freeport president and CEO, said on a July 23 earnings call. But the tariff ended that potential by driving down US copper prices.
The company’s share price dropped 10.4% to $39.14 on July 30 over the day previous.
Further action
In the July 30 proclamation, Trump directed Commerce Secretary Howard Lutnick to use the Defense Production Act to take steps to require a quarter of high-quality copper scrap produced in the US to be sold domestically. Trump also ordered Commerce to require 25% of copper inputs like concentrates produced in the US to be sold domestically in 2027. This would rise to 30% in 2028 and 40% in 2029.
But the requirements may not matter much, since industry already meets the planned market controls, analysts said.
The move “should have little bearing on product flows” for scrap, ore and copper cathode as the “domestic share already exceed the initial 25% minimum requirement,” BMO Capital Markets analysts said in a July 31 report.
Still, in the proclamation Trump left the door open for more copper tariffs if his administration deems them necessary, calling for a mechanism to add them and for a review of the copper market by June 30, 2026, in the proclamation.
“In my judgment, the action in this proclamation will, among other things, help increase domestic production of semi-finished copper products and intensive copper derivative products, thereby reducing our nation’s reliance on foreign sources,” Trump said in the proclamation.
Source: Platts