Trump’s pursuit of copper and aluminum tariffs will increase prices for US consumers

Due to a lack of domestic manufacturing, President Donald Trump’s plan to slap tariffs on U.S. imports of copper and aluminum will raise prices for local consumers, industry players and experts warned Tuesday.

Trump stated in a speech on Monday that he will slap tariffs on steel and copper, two metals used to create U.S. military gear, in order to encourage manufacturers to produce them domestically.

“We have to bring production back to our country,” he stated.

Copper prices increased 0.9% to $4.2705 a pound, or $9,415 per metric ton, on COMEX due to the prospect of tariffs on U.S. imports, which increased the premium over copper on the London Metal Exchange (LME) to $389 per ton.

According to BNP Paribas, the United States imports 38% of its copper needs and is heavily reliant on imports of aluminum, which comes from nations like Canada and Mexico to meet 82% of its yearly use.

“Until the downstream industry (refining/smelting) has received adequate investment, manufacturers in the United States will have little choice but to pass on higher costs from imports to consumers,” stated Natalie Scott-Gray, senior metals analyst at StoneX.

According to analyst Daniel Morgan of Sydney investment bank Barrenjoey, U.S. copper and aluminum smelters have been shutting down and would require new power contracts and infrastructure to reopen, among other things.

CHANGE TO FLOWS OF TRADE?

Analysts warn that Trump’s proposal to impose import tariffs might undermine his commitment to slash consumer costs when he was elected president of the United States in November.

Although the scope of the levies’ application was unclear, a number of mining CEOs have already stated that they are planning for various eventualities as markets anticipate a possible shift in trade patterns.

According to Morgan, Canadian aluminum manufacturers Rio Tinto (RIO.AX) and Alcoa (AA.N) are unlikely to experience a decline in income. Instead, the costs would probably be passed on to automakers, who would then pass them on to American consumers.

Rio Tinto chose not to respond.

William Oplinger, the CEO, raised concerns about “wide ranging effects on supply, demand, and trade flows” during a results call last week, according to a representative for Alcoa. According to his calculations, a 25% tariff on Canada’s existing export volumes to the United States may result in an extra $1.5 billion to $2 billion in expenses for American consumers per year.

The United States is India’s largest export market for aluminum, according to an executive at the country’s leading mining lobby organization, which anticipates that India’s government would attempt to convince Trump not to impose any taxes.

B.K. Bhatia, extra secretary general of the Federation of Indian Mineral Industries, stated that “if Trump imposes tariffs, it will have an adverse impact particularly on aluminum because Europe is already on path to impose a carbon tax and the UK might do it too.”

If import duties are implemented, U.S. physical aluminum premiums, which have already increased significantly in recent months, may increase even more, according to BNP Paribas.

Since the United States is a net importer of copper, John Fennell, CEO of the International Copper Association Australia, stated that any tax on imports would affect the sector, even though it would speed up the construction of new mines like Rio Tinto’s Resolution in Arizona.

A new tab is opened by Freeport-McMoRan (FCX.N). Since the miner sells all of its U.S. copper domestically and exports its Indonesian metal to Asia, CEO Kathleen Quirk stated last week that the miner will not be impacted by copper tariffs. However, she was concerned about how such levies may affect inflation.

According to Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting, steel and aluminum tariffs imposed during Trump’s last tenure had little effect on Japan, the third-largest steel producer in the world.

Value-added specialty steel products make up the majority of Japan’s steel exports. Additionally, we anticipate a similar strategy this time around because value-added items were left out,” Akuta stated.

“These value-added products are difficult to substitute, making them less likely to be targeted.”