Justin Hamel / Bloomberg via Getty Images
Spools of copper wire ready to be shipped at CN Wire Corporation in Santa Teresa, New Mexico on Feb. 21, 2024.
Copper prices had already been rising in anticipation of U.S. tariffs.
The 50% tariff scheduled to take effect Aug. 1 will make the material even more expensive, likely straining manufacturers reliant on it.
Futures trading has further muddied the waters, as traders look to take advantage of the differences in prices.
Prices on copper, a metal used in anything from cars to data centers, are soaring and could hit U.S. manufacturers grappling with a new 50% tariff.
American manufacturers remain highly dependent on copper imports, which make up about half of domestic demand. Trump says boosting U.S. copper production should be a priority for national security, and that the tariff due to take effect Aug. 1 will stimulate growth.
However, copper mines and refineries take years to build. In the meantime, U.S. manufacturers may have to keep buying copper imported from Chile, Canada, Peru and Mexico—except at more expensive prices.
“This risks higher inflation, raising costs for U.S. manufacturers without a domestic alternative available,” wrote Ewa Manthey, a commodities strategist at the Dutch bank ING.
Expensive copper could cause “demand destruction,” as manufacturers scale back production because their input costs have gone up. And copper buyers have “been highlighting for a while now that a 50% tariff is not sustainable,” wrote Bank of America commodities analysts in a research note.
U.S. manufacturers with long-term contracts with copper suppliers should be more insulated, said Stephen Hare, lead economist at Oxford Economics. Others will “start feeling the pinch” if they have to buy copper at today’s prices, he added, since it’ll take a bit of time for inflated prices to normalize.
The cost pressures would come as economic uncertainty could prompt a slowdown in the industrial sector.
“Your margins are going to be squeezed whilst there’s all this volatility,” Hare said. “It could be a bit of a tough time for U.S. manufacturers that are highly reliant on copper.”
The tariff plans follow the Trump administration’s ongoing review of whether an overreliance on copper imports poses a national security concern. Trump said on Wednesday that copper is the second-most-used material by the Department of Defense.
“America will, once again, build a DOMINANT Copper Industry,” he said in a Truth Social post.
The U.S. produced some 1.1 million tons of copper last year, about 5% of the 23 million tons produced globally, according to the U.S. Geological Survey.
U.S. copper production has fallen 20% over the last decade, according to Manthey, the ING strategist. Scaling up production may not be easy, Manthey added, since building new mines can take nearly three decades, due in part to lengthy permitting processes.
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