【By Observer Net, Wang Yi】 With less than two weeks until the U.S. is expected to impose new tariffs on copper, this $250 billion global industry has already fallen into anxiety and uncertainty. The chairman of the world's largest copper producer, Chile's Codelco, Maximo Pacheco, complained that President Trump announced the copper tariff without providing more details, which makes the uncertainty difficult to manage. "We don't fully understand what the U.S. is trying to achieve with this," he said.

Earlier this month, Trump announced that a 50% tariff would be imposed on all imported copper into the U.S. starting August 1. However, the Financial Times reported on July 20 that the White House did not clearly specify whether the tariff would apply to refined copper, semi-finished copper products, or copper ore, leaving mining companies and industrial users confused about the specific implementation time and scope of the tariff.

"Our customers are uneasy; they need to figure out where everything will end up," Pacheco told British media. Free trade "is valuable for both sides," and Chile is willing to supply more refined copper to support its manufacturing industry in the U.S.

Chairman of Chile's National Copper Company, Maximo Pacheco, Media

The Economist reported on the 17th that the U.S. is the second-largest consumer of copper after China, but its production accounts for only 5% of the global supply and 3% of processing. About 45% of U.S. demand is met by net imports (a net import occurs when imports exceed exports during a certain period), mainly in the form of processed copper ores.

Chile is the main supplier of refined copper to the U.S., accounting for over 60% of the U.S. refined copper imports. Pacheco stated, "If the U.S. really wants to develop more copper manufacturing industries, it obviously needs more electrolytic copper plates."

The Financial Times analysis pointed out that although the U.S. has some copper mining, its domestic smelting capacity is limited and cannot completely meet consumer demand. Industry insiders pointed out that building new smelters usually takes several years, so the U.S. will have difficulty replacing imports with domestically produced refined copper in the short term.

The report stated that at the time of the tax threat, the global copper industry is already facing the dilemma of sluggish supply growth. Declining ore grades and rising development costs make it increasingly difficult to advance new mining projects.

"We don't fully understand what the U.S. is trying to achieve with this statement," Pacheco said. The U.S. market accounts for about 11% of sales of copper electrolytic plates from Pacheco's company.

The Economist analyzed that Trump's tariff announcement has already caused significant fluctuations in the market. The price of copper supply in the future is expected to surge, while overseas prices have dropped. Since early this year, this price divergence trend has continued to widen.

Meanwhile, United Overseas Bank (UOB) noted in a report that due to American companies stockpiling large amounts of copper to cope with tariff risks, copper imports into the country have surged, leading to a decline in copper inventories on the London Metal Exchange (LME) and causing "severe volatility and speculation" in the market. Two days after Trump announced the copper tariff, Bloomberg noticed that the news had triggered a surge in copper prices, which was causing a rush across the industry to transport copper to the U.S. Trade operators, eager to complete shipments before the tariff takes effect, are considering shifting delivery locations to Hawaii and Puerto Rico to shorten transportation times.

Companies with copper assets in the U.S. are benefiting from the price increase. Global mining giant Rio Tinto and Freeport-McMoRan, which accounts for 60% of U.S. domestic copper production, saw their stock prices rise. For the latter, a 50% tariff could bring annual profits of up to $1.6 billion.

However, The Economist believes that high prices do little to increase U.S. domestic copper supply, at least in the short term. New mines often take years or even decades to develop, and the cost of building a copper mine in the U.S. is about three times higher than overseas. Smelting copper is also not easy, as constructing a smelter can cost around $3 billion and requires a lot of electricity. Industry executives generally avoid making such large capital investments based on a tariff policy that could be revoked at any time by Trump.

Some analysts suggest that Trump may lower the tariff rate or set exemptions for specific products before the tariff officially takes effect to mitigate its impact. Given his previous pattern of retracting on various tariff policies, foreign media made this guess and jokingly referred to it as the "TACO deal", an acronym for "Trump Always Chicks Out" (Trump always chickens out).

The Financial Times said one possibility is that the U.S. might only impose tariffs on semi-finished copper products like wires, pipes, and copper strips, while allowing refined copper to continue being imported without additional tariffs.

"If the copper tariff is formally implemented, the chain reaction on end-users such as data centers and the automotive industry will be very strong," warned Gracelin Baskaran, director of the Critical Minerals Security Program at the U.S. think tank Center for Strategic and International Studies (CSIS). "Once the domestic industry feels the pressure of the tariff, the policy is likely to be re-evaluated because it threatens the U.S. growth agenda."

The Economist shares this view. The magazine cited an example that each car uses an average of 20 kilograms of copper, with electric vehicles using more; a data center requires at least 27 tons of copper per megawatt of power, and large sites add up to nearly 3,000 tons. In the popular NVL72 rack of NVIDIA, the total length of copper wires used to connect 108 advanced processors is nearly 2 miles (1 mile is approximately 1.61 kilometers).

"A significant rise in U.S. copper prices could discourage companies from building factories and data centers in the U.S., which would undermine Trump's grand vision of revitalizing the American economy," The Economist stated bluntly.

This article is an exclusive contribution from Observer Net. Reproduction without permission is prohibited.

Original: https://www.toutiao.com/article/7529357037738967587/

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