BLOG — July 15, 2025

Copper tariffs easier to deal with tactically than strategically

The US administrations proposed 50% tariffs on copper imports are not yet fully detailed, but they pose significant risks of increased costs across various sectors, including automotive, electronics, utilities, and data centers. Near-term, inventories and reduced scrap exports may mitigate duties, but localizing sourcing could take more than five years.

Copper prices, inventories react to surprisingly high copper tariffs

On July 8, 2025, President Donald J. Trump stated on social media that the Section 232 review of copper materials and products will lead to tariffs of 50% from August 1. Despite being widely expected, the scale and speed of implementation were surprising. Prices reflected the change immediately. The COMEX copper price jumped 13%, while copper on the LME fell 1.5%. This saw the disparity between some contracts on the two exchanges exceed 25%. Details remain scant and so understanding what will be implemented on August 1 is uncertain, but the negative implications for US copper buyers are already evident and expected to worsen.

If the review follows the pattern of similar tariffs on steel and aluminum it is likely that few exceptions will be granted to individual countries; initial product coverage of copper products will be broad; and, the list of products will be extended over time to cover manufactured goods.

In anticipation of the tariffs and to benefit from a price differential, copper inventories on the US-based COMEX exchange have been built up. Inventories on the LME in the Americas have been almost cleared and those in other locations are depleted. This has seen COMEX inventories rise to their highest level since June 2014.

The high level of stocks will act as a buffer to the tariffs.  Holders of stocks may be looking to lock in current gains and exit their positions, rather than wait for uncertain implementation. This partly explains why the differential between COMEX and LME price is holding at 25%. As more certainty on timings is made public, this premium is expected to rise.

US manufacturers' stocks of copper materials and derived products may be exhausted sooner according to reports. There is evidence of stockpiling ahead of the tariffs. The S&P Global Manufacturing PMITM for copper buyers shows stocks of purchases at 52.5 in June (over 50 indicates a sequential increase) compared to 51.6 in May. The index only turned positive in March after nine months of decline. Additionally, to US imports of copper have surged since the launch of the Section 232 review as buyers look to pre-empt high duties. Imports of ores, unwrought materials and basic manufactured goods jumped 120% in May versus the 2024 average.

US imports of copper materials and basic products section 232 tariff data

However, with US copper inventories sufficient for 9-12 months of expected consumption, the United States can minimize the imports of most forms of copper until stocks are depleted. As such, it will take several quarters for the COMEX copper price premium to fully reach 50% to LME prices.

S&P Global’s Pricing and Purchasing service revised forecast assumes a 50% tariff will be imposed August 1, 2025. This is based on the past experience of impositions of Section 232 tariffs on aluminum and steel in 2018 and earlier this year. This sees a sharp ramp up in the forecast for the COMEX premium, which reaches around 49%, as flows of imports start to rise as inventories are depleted.   

There is an outside chance that US inventory holders may choose to hold back stocks until the full effect of tariffs is present, in which case the premium would rise more sharply. This is unlikely due to the additional costs this would entail for holders. Specialist copper materials may feel the upward impact of tariffs quicker. Products that are not manufactured in the United States and are less commoditized, such as oxygen-free copper, are likely to see a quicker impact of tariffs due to limited inventories.

Long term restructuring of mining, refining and trade flows

The coverage of the tariffs is likely to be widespread and encapsulate the full copper supply chain. Exemptions are unlikely given experience of the steel and aluminum tariffs (which have the same 50% tariff rate) while the duties are also tied up with ongoing negotiations over IEEPA country tariffs where exemptions have only been granted in one instance for the UK so far

Downstream supply chains face threats not only from the duties on materials, but also on the potential for “derived product” tariffs. Sectors including autos, electronics, utilities and data centers rely on foundational products such as batteries, circuit boards, electric motors, generators, transformers and cabling which could end up being captured by tariffs. US imports of a group of six foundational manufactured products were worth US$102 billion in 2024, compared to a US$15.7 billion value of copper materials in HS 26 and 74. Mainland China accounts for 56% of batteries, 30% of circuit boards, and 13% of transformers. Japan accounted for 26% of power generators and10% of motors. Other sensitivities include 51% of power generators which come from the EU and 29% of circuit boards which come from Taiwan.

Mexico, Mainland China and EU lead supplies of copper-dependent products data on copper use July 2025

Reduced reliance on refined capacity more important than derived products

While the short-term impact of tariffs on US manufacturers and users of copper is mitigated by inventory levels, reducing the long-term reliance on imports is far from simple. The reliance on imports is higher in refined materials at 47% than derived products at 14%, though the latter sees growth in import reliance too. That would suggest refined materials may face more disruption and a greater need for investment than derived products.

There are no quick fixes to increasing the US import dependence. The lead time for developing a copper mine is over 20 years, while recycling facilities or midstream processing take three to five years. In the near-term, the US could improve self-sufficiency by limiting exports of basic materials as well as disincentivizing imports. In the 12 months to Feb. 28, 2025, the US imported 1.06 million tons of unrefined, unwrought copper and scrap, including importing 139,000 tons of scrap while also exporting 1.20 million tons of the same including exporting 950,000 tons of scrap. That yields a “scrap surplus” exported of 811,000 tons. While the products are not strictly interchangeable, particularly given scrap waste exports include materials which may require significant processing, there does appear to be the potential to greatly reduce imports of raw materials with sufficient incentives.

Scrap exports providing a major source of domestic materials. Copper data

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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