US Copper Tariffs Delayed, Traders Growing Wary of Copper Price Bull Market

Since Donald Trump returned to the White House, copper prices have soared sharply, driven by a dramatic global reallocation of inventories amid the risk that he may impose tariffs on the metal. But as Trump's second term approaches its midpoint, many bulls in the market are growing wary: if he does not follow through on his pledge, prices could collapse. Until a few weeks ago, New York copper futures had consistently traded above the global benchmark set by the London Metal Exchange (LME), allowing traders to earn unprecedented profits by shipping copper to the US before tariffs took effect. In turn, inventories outside the US have fallen sharply, and a steady stream of imports into the US created a feedback loop that helped push the LME price to a record high of nearly $15,000 per ton last month. But as the midterm elections approach, investors across markets are questioning whether a strong Democratic showing in the midterms could disrupt Trump's trade agendaor even prompt him to double down on tariffs. For copper bulls, the consequences could be profound if Trump proves unwilling or unable to advance tariffs. Analysts at Natixis SA warned that the tariff trade has created a bubble in one of the world's most important industrial commodities, and that the bubble could burst quickly if tariffs are ruled out. Macquarie Group said that in such a scenario, prices could slump toward $10,000 per ton; while if tariffs are announced with a time lag allowing traders to ship more metal to the US, prices could rise as high as $18,000. "I've never seen anything like this before, and the future direction of prices ultimately depends on one person's decision," Alice Fox, a commodities strategist at Macquarie, said in an interview. As the midterm elections approach, there are signs that traders are increasingly willing to bet that tariffs will not materialize, with their bets concentrated on the spread between New York Comex and LME copper futures. The two markets once moved almost in lockstep, but Comex priceswhich would include the tax burden if Trump implements tariffshave consistently held a huge premium over LME since Trump first formally proposed copper tariffs in February 2025. Traders can sell Comex contracts and buy LME contracts to bring the two markets back into line. But according to Marc Bailey, chief executive of Sucden Financial Ltd., one of the largest brokerage firms in the market, such arbitrage activity had almost completely disappeared until recently. The reason: if Trump does proceed with tariffs, traders who sold Comex contracts could face huge losses. But in recent weeks, Sucden has received inquiries from investors with renewed interest in this trade. Over the same period, the spread between Comex and LME prices has collapsed, and the decline accelerated last month after Reuters reported that Trump's copper tariff plan had been shelved due to concerns about its inflationary impact. "The mood seems to have shifted somewhat over the past few weeks," Bailey said in an interview in London. "People are starting to think about getting back in and testing the waters." Reduced shipments to the US If this trend gains momentum, investors' growing "anti-tariff" bets through the Comex spread could have a major impact on the marketsteadily offsetting the incentive for traders to ship more metal to the US. In the physical copper market, according to ship-tracking company Kpler, copper cargoes from Africa bound for the US have been declining as the Comex spread has collapsed. Despite growing doubts about tariffs, traders are also wary of one variable: Trump could suddenly announce tariffs after the midterm elections but before their cargoes arrive at port. As the metals industry's annual gathering LME Week kicks off in London this weekend, the collapse of the Comex spread is fueling a debate over whether gravity will eventually catch up with copper prices, as soaring energy prices, rising interest rates and a weak stock market threaten the demand outlook. As these risks intensify, the sharply divergent supply dynamics between the US and the rest of the world give traders another reason to sell the Comex spread, according to Alastair Munro, a metals strategist at Marex Group, another large metals brokerage. Recently, growing supply tightness on the LME has pushed near-month prices higher relative to Comex, narrowing the gap between the two contracts as delivery approaches. For example, the September contract fell by more than $600 per ton in the month before delivery, and Comex settled at a premium of less than $4. "There is a greater willingness to sell New York and buy London, because as contracts enter their delivery month, the arbitrage naturally tends to converge," Munro said in a telephone interview in London. "The arbitrage is just one manifestation of it, but under a bearish macro view, the willingness to short copper more broadly is growing." A polarized debate Admittedly, copper traders have already been burned by Trump on the tariff issuemost painfully last July, when he imposed a 50% tariff on downstream copper products but left the commodity-grade metal traded in futures markets untouched. That caused Comex prices to plunge, but until recently they still maintained a considerable premium over LME because Trump left the door open for future levies. Since then, the copper market has been mired in a polarized debate over "whether he will actually impose tariffs." Despite growing doubts about tariffs, almost no one in the copper market expects him to rule them out entirelybecause doing so could send the massive inventories piled up at US ports flooding back into international markets. A popular theory is that Trump's silence on tariffs is a deliberate "strategic ambiguity" designed precisely to prevent such a backflow. But given the central place of tariffs in Trump's political agenda, some still expect him to proceedpossibly as early as January 1, consistent with recommendations the US Commerce Department made to Trump last year. "The key uncertainty is US tariff policy," said Grace Li, investment director at Shanghai Ducheng Private Fund Management Co. "With little visibility into the government's thinking, it is hard to make a direct directional call on whether to go long or short copper." A rare opportunity US copper inventories have grown so large that it could take manufacturers years to work them off. At the same time, the surplus has created a rare opportunity for traders: buy the inventory while selling futures contracts on Comex to lock in a small profit. These so-called contango financing trades add further complexity to the debate over supply dynamics and the price outlook for next year. Such profits are meager compared with the windfall opportunities created by US import trade. Still, analysts at Bank of America said the returns are enough to discourage copper from flowing back into global marketshelping to support prices even if Trump backs down on tariffs. For anyone bearish on copper, the risk that Trump will still proceed with tariffs remains hanging over the market. According to the Commerce Department's recommendations, tariffs could be phased in: 15% in 2027 and 30% in 2028. That could mean copper continues to be sucked into the US, reigniting the global bidding war that pushed prices to record highs. China, the largest consumer, has already seen inventories heavily drawn down; if China is forced to restock while US imports surge, prices could spiral higher. "They may have thought this round of stockpiling should have ended long ago by now," said Helen Amos, a commodities analyst at BMO Capital Markets Ltd. "What if they have second thoughts: 'Actually, this is going to last another two years'?"