【By Observer Net, Yuan Jiaqi】
After steel and aluminum, US President Trump announced this week that he will impose a new 50% tariff on all imported copper into the United States. On Thursday local time, he announced on social media that the new tariff will take effect on August 1 this year. Trump claimed that he made this decision after receiving a national security assessment report.
As early as Tuesday, after Trump hinted at the tax increase, the price of copper futures in the US soared more than 10%, breaking the historical high point of the New York Mercantile Exchange. On July 10 local time, the U.S. media Bloomberg reported that the surge in copper prices is triggering a frenzy across the industry to transport copper to the United States. Traders eager to complete the shipment before the tariff takes effect are considering changing the delivery location to Hawaii and Puerto Rico to shorten the transportation time.
Transportation from Asia to New Orleans usually takes over a month, and now traders who ship goods may not be able to arrive at the port before the tariff takes effect. However, transporting to Hawaii only takes about 10 days. According to sources, at least one trader has completed the transportation to the region.
Some traders also said that for South American producers, the U.S. overseas territory of Puerto Rico is also an attractive delivery point.
Surge in U.S. Copper Prices - Bloomberg Chart
Almost half of the U.S. copper consumption comes from imports, most of which come from Chile, Canada, and Mexico. After Trump suddenly announced the tax increase, the price of copper futures on the NYMEX surged 17% to $5.8955 per pound, setting a new record high.
Bloomberg pointed out that although the U.S. taking action against copper was expected in the industry, the 50% tax rate still exceeded the expectations of most market participants. Previously, the market generally expected the tax level to be around 25%.
A source told the U.S. media that as some traders began preparing for the tariff announcement, the volume of copper shipments had already decreased, but a large amount of copper was still on its way to U.S. ports.
"Trump's statement once again puts traders in a race against time," the media said. After the new copper tariff announcement on Tuesday, the confused traders worked through the night to deal with the chaos: they had to decide how to handle the goods already in transit and weigh whether to seize the opportunity to rush in more.
Some people involved in the market revealed that some buyers were even willing to pay a high premium to obtain more copper before the last moment, such as adding nearly $400 per ton to the price on the London Metal Exchange. Others tried to redirect cargo originally destined for China to the United States.
Buyers particularly favored brands that met the Comex contract delivery standards, because even if the copper arrived in the United States and could not find other buyers, it could be resold on the exchange as a last resort.
This move by traders also carries significant risks, especially for merchants who have already paid a high premium for the copper. They may face the situation where the tariff takes effect while the goods are still in transit. However, when previous governments implemented metal tariffs, they often exempted goods already in transit at the time of tariff implementation, providing potential room for maneuver for traders willing to take the risk.
In addition, traders must also deal with a series of unknown variables, such as the fact that Trump's statement did not clearly specify which types of copper would be subject to the tax.
Market experts estimate that in the coming weeks, copper inventories in the U.S. may reach 500,000 tons, with about half stored in key storage centers in New Orleans. Some are also stored in Panama City Port in Florida.
Bloomberg reported that as the main supplier of copper to the U.S., Chile's mining companies are holding meetings intensively to discuss how to prioritize shipments to the U.S. according to existing customer agreements before the end of July.
Pierre Gratton, president of the Canadian Mining Association, warned that the U.S. does not have sufficient copper smelting capacity and smelters, and can only import this metal from countries like Canada. Such a high tariff rate will "harm U.S. manufacturing."
On July 8 local time, Trump met with cabinet members at the White House. Video screenshot
According to reports from U.S. Consumer News and Business Channel (CNBC) and others, in addition to imposing new tariffs on copper, Trump's "firepower" also targeted the pharmaceutical industry. On Tuesday, he also stated that he would soon impose "very, very high rates, such as 200%", on imported medicines, but before that, pharmaceutical companies might have "about a year or a year and a half" to start producing their products in the U.S.
This statement caused investors to feel tense, and the stock prices of U.S. pharmaceutical companies such as Eli Lilly, Merck, and Pfizer saw their gains narrowed. However, some industry insiders believe that the tariffs will not pose a major threat to pharmaceutical companies in the short term. A Washington lobbyist even commented that this was "typical Trump-style exaggeration."
Previously, the Trump administration had announced high tariffs on the automotive and steel industries. However, the so-called Section 232 investigation initiated by Trump's government on pharmaceuticals, copper, wood, aerospace, chips, and consumer electronics under the pretext of national security has not yet concluded, and these industries are still facing the threat of tariffs.
The Financial Times of the UK analyzed that the investigations carried out by the U.S. on these key industries will increase uncertainty for its trade partners, who are struggling to try to protect themselves from the impact of Trump's broad "reciprocal tariffs" through negotiations.
In early April, Trump announced that he would impose "reciprocal tariffs" on all of the U.S.'s trading partners, but to give time for negotiations, he later temporarily reduced the tariff rates for most countries and regions to 10%, effective for 90 days until July 9. However, so far, the U.S. has not reached agreements with major economies except the UK and Vietnam, and only reached a framework agreement with China.
On July 7, Trump signed an executive order to extend the implementation date of the "reciprocal tariffs" to August 1, while starting to send letters to trade partners who had not yet reached an agreement, informing them of the tariff rates they would face. The tariff rate for imports from Japan and South Korea reached 25%.
Trump also warned that any country attempting to retaliate against U.S. tariffs would face double taxation. On the 8th, during a cabinet meeting, he once again feigned innocence, saying, "We want to build relationships, but in every case, they treat us much worse than we treat them."
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