Global manufacturing executives are begging for clarity on Donald Trump’s tariff policy before a 50 per cent levy is imposed on copper imports, as their stockpiles diminish and the clock ticks on existing contracts.
The US president has vowed to impose the higher tariff on the metal from August 1, matching levels already in place on all imports of steel and aluminium. But it remains unclear whether the levy will be applied to all copper products, stoking anxiety across industries.
Companies’ deepening concerns over copper come as they are already grappling with the higher costs of Trump’s escalating trade war, with US sales of products from cars and trucks to construction equipment hit by policy uncertainty.
Analysts warn the consequences to prices and demand of permanently higher copper tariffs will be serious since the metal is widely used in electric vehicles, chips and defence equipment, as well as household appliances and wiring.
The US relies heavily on imports of the metal, which accounted for about 53 per cent of its copper demand in 2024, according to Morgan Stanley.
John O’Leary, North American boss of Daimler Truck, said companies had become increasingly frustrated since they had anticipated clarity on the tariff policy by now. The group this week reported a 20 per cent drop in second-quarter truck sales in North America as logistics companies held off purchases due to the uncertainty.
“Obviously, no tariffs are best, but if there’s going to be something, just tell us what it is and we can get on with life and start figuring out how to deal with it,” O’Leary said.
Until now, O’Leary said, the company had pushed back against suppliers that have invoked tariffs as force majeure in an effort to raise prices on long-term purchasing deals on aluminium and steel.
“The contracts we’ve had have protected us up to this point, but certainly at some point in time they start to run out and then renegotiations take place.”
The White House has not released details of the tariffs, including whether they will apply to semi-finished copper products such as wires and rods, and whether restrictions on exports of copper scrap might also be put in place.
In addition to long-term contracts, there has been a rush of copper into the US this year on expectations of higher tariffs. As a result, analysts say end users of copper are unlikely to be hit with the full impact until the producers’ own warehouses run out of their supplies.
“I would say there is six to nine months to use that buffer built from extra buying of refined copper, and then that’s when you could start to see the full price of the 50 per cent tariff,” said Amy Gower, commodities strategist at Morgan Stanley.
While the pre-buying means American industrial companies have healthy inventories of the metal for now, eventually they “will need to take raise prices to offset the higher copper costs, which could lead to demand destruction down the road”, said Jake Seltz, a portfolio manager at Allspring Global Investments.
Companies and investors are still hopeful that the Trump administration will settle for lower copper tariffs. The arbitrage between US prices and those elsewhere has only blown out to about 28 per cent, suggesting the market does not fully believe the 50 per cent tariffs will come into force.
“My best guess is that the realisation of the impact of a 50 per cent tariff on copper will hopefully be understood before it’s actually felt,” said James Cordier, chief executive and head trader at Florida-based investment group Alternative Options.
Barclays estimated that a 50 per cent tariff could add up to $110 to the cost of a petrol vehicle and as much as $700 to an electric car since the metal is used in wiring harnesses as well as batteries, motors and inverters.
However, the impact is likely to filter through indirectly for carmakers, since it is suppliers that often purchase the metal. Trump has also promised that the auto industry, which faces a 25 per cent tariff on imports of foreign-made vehicles, will not be stacked with additional levies on the metals.
During a pre-earnings briefing with analysts on Wednesday, Germany’s BMW described the impact from higher copper tariffs as “negligible”, according to Bernstein.
Aerospace Industries Association, a US trade group, has estimated that it may take up to 10 years to find, certify and switch to a new supplier of critical minerals because of the complex nature of aerospace and defence supply chains.
“In the near term, we encourage the administration to maintain access with trusted sources of these minerals to avoid a price spike that will be felt most by our small and mid-size suppliers,” said Dak Hardwick, AIA vice-president of international affairs.
How copper prices will trend over the medium term is also unclear. Analysts expect the global price on the London Metal Exchange to slump once the arbitrage trades run their courses. If prices remain high, users could switch to alternative materials such as aluminium, which would cause copper prices to decline, according to SMBC Nikko.
For some, the copper tariffs present an opportunity. Cable maker Prysmian, the largest corporate buyer of copper outside China, said it saw the tariffs as being “positive” for the company even as it awaited more details on what products the levies will apply to.
The Milan-listed company already makes the majority of its US products in the US — sourcing copper from Freeport McMoran and from recycled scrap material. It then makes the wire and cable at its own facilities in the US.
“We are much less exposed than the country and the rest of the sector to imports,” said Maria Cristina Bifulco, head of investor relations at Prysmian, noting that it imports only about a third of its US needs.
However, copper prices are passed through directly to customers, based on benchmark prices, and Bifulco acknowledged that higher copper prices could hit demand.
“In our case, we pass through to the customers the raw material prices. So the real impact of the tariff is not on us, it is on the final customers. The raw material price trends tend to influence the demand behaviour.”
Additional reporting by Sylvia Pfeifer in London, Harry Dempsey in Tokyo and Martha Muir in New York
