Copper Tariffs: Another Reversal Likely

• Due to the inelasticity of demand for copper, a tariff on copper is anticipated to push up United States (U.S.) domestic prices. The tax would be paid by American consumers rather than foreign producers. Indeed, domestic U.S. copper prices have significantly diverged from prices elsewhere since President Donald Trump first announced threatened tariffs in March. Copper traded in New York Stock Exchange jumped by over 10% on July 8, 2025.
• With copper being a key input in the manufacturing sector, this will increase the price of U.S.-made manufactured goods and reduce U.S. firms’ competitiveness compared to Chinese or European rivals, particularly in the automotive and electronics industries, where copper usage is most intensive.
• Counterintuitively, implementing a tariff could potentially harm the U.S. copper refining industry, as a widening gap between U.S. and global copper prices may incentivise foreign exporters to redirect finished copper products to the U.S. market, increasing competition and undermining domestic refiners.
• Fitch expects that the measures will likely deter U.S. copper exports, valued at approximately US$12.2Bn in 2024. However, the tariffs are unlikely to significantly impact copper producers that do not export to the U.S., with Chile being a notable exception. The primary concern for exporters is a potential decline in U.S. copper consumption, which Fitch considers unlikely. Additionally, producers whose export prices are linked to U.S. copper prices could potentially benefit from higher prices resulting from reduced U.S. imports.
• Nevertheless, Fitch views the tariff threat primarily as a bargaining tactic rather than a genuine policy proposal. The U.S. is actively engaged in negotiating numerous trade agreements with various economies, and this recent proposal may be an attempt to leverage concessions on unrelated issues. Since the 50% tariff threat was conveyed verbally and lacked official backing, the final implementation will likely be less severe, potentially reduced in scope over the coming weeks. Most investors have anticipated that any U.S. tariffs on copper would be closer to 25%, indicating a market expectation of a more moderate approach.

(Source: Fitch Connect)