(Bloomberg) — President Donald Trump’s moves to slap tariffs on US copper imports set off a global race for traders to rush cargoes into the country for much of the year. Now that the 50% levy is just weeks away, there are already signs that demand for the metal is drying up from Texas to New Jersey.
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Sam Desai is vice president at RM-Metals, a distributor in the Garden State that brings in copper from abroad and sells it to domestic users like appliance makers. US prices had already been trading higher than global benchmarks for most of the year as the market anticipated tariffs. But 50% is higher than what Desai expected, forcing RM-Metals to immediately reduce the amount of copper it imports.
“We made about a 25% reduction” from previous buying levels once the news broke, he said, adding that the company also canceled pre-existing orders when possible. For the shipments that weren’t canceled, Desai predicts they will largely end up sitting in stockpiles because customers are “leery” about buying products now.
“The customers don’t want to pay the duty on it — it’s too high,” he said. “We’re going to hold it, and then see what happens in a couple months.”
The comments from US metals distributors offer an early sign of how Trump’s proposed copper tariff — which came in much higher than initially anticipated — is already filtering through the industrial supply chain, potentially eroding demand for the metal that’s used in construction and manufacturing.
The tariffs are scheduled to start Aug. 1, though American factories have already been paying more for the metal. For months, New York futures — the domestic benchmark — have traded at premiums to London prices. Comex copper prices have risen 38% this year, compared to the 10% gain on the London Metal Exchange. The dislocations have significant impact because copper finds its way into almost every part of the economy, from housing and telecommunications wires to appliances and computer chips.
In the US, copper buyers now have the option to draw from stockpiles built up from earlier this year, rather than place new orders with distributors like RM-Metals. Inventories in Comex-certified warehouses have swelled to a seven-year high as metals traders rushed in shipments to take advantage of arbitrage opportunities.
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