Copper prices experienced a significant surge in New York, climbing over 5% higher than other global benchmarks, following hints from US President Donald Trump about potentially imposing a 25% tariff on copper imports. Trump’s remarks, made during a Congressional speech, triggered a rapid increase in Comex copper prices during Asian trading hours. This unexpected development caused traders to react swiftly, considering the implications of larger-than-anticipated tariffs coming into effect sooner than expected.

Last week, Trump had announced a comprehensive investigation by the Commerce Department, exploring the possibility of imposing copper tariffs on grounds of national security. This announcement had already driven up Comex prices, creating a notable disparity with prices in London and Shanghai. While the department may take some time to decide on the tariff implementation, Trump’s recent suggestion of a 25% levy caught the market off guard. This move follows his earlier decision to impose similar tariffs on aluminum and steel.

The Comex rally also influenced a modest increase in London Metal Exchange prices, with three-month prices climbing by up to 2.5%. The persistent premium of New York futures over LME prices, currently around 12%, has spurred a global search for copper that can be shipped to the US before the tariffs take effect. The existing arbitrage opportunity, with LME prices near $9,500 per ton and New York prices significantly higher, presents an attractive prospect for market players accustomed to operating on slim margins.

Furthermore, the drawdown of Comex copper inventories, coupled with a surge in requests to withdraw metal from the LME, suggests that US manufacturers are likely stockpiling copper in anticipation of the tariffs. This rush to secure copper before potential price hikes has also impacted other metals, with zinc and aluminum prices rising on the LME. The broader rally in industrial metals and mining stocks in Europe was fueled by announcements from Germany and China regarding defense spending and steel output reduction, respectively.

The escalating trade tensions and looming tariffs have injected volatility into the copper market, prompting traders to recalibrate their strategies amidst uncertainties about future pricing dynamics. The evolving landscape underscores the interconnectedness of global markets and the profound impact of geopolitical decisions on commodity prices and trade flows. As market participants navigate this complex environment, the repercussions of protectionist measures on supply chains and consumer prices remain key areas of concern, shaping the trajectory of the copper market in the foreseeable future.