Metals Markets Slide as Trump's Tariffs Add to Volatility, Threaten Global Growth

By Joe Hoppe

Metal prices were pressured lower after U.S. President Trump imposed tariffs on Canada, Mexico and China.

LME three-month copper fell 1.2% to $8,958 a metric ton and LME three-month aluminum dropped 0.9% to $2,571.50 a ton in European midday trading. LME base metals prices will likely face strong near-term bearish pressure on growth and demand concerns, macroeconomic risk-off sentiment from markets, and a stronger U.S. dollar, JPMorgan analysts said in a note.

The U.S. will impose a 25% tariff on goods from Mexico and Canada, with a reduced 10% tariff on Canadian energy, and an additional 10% tariff on goods from China from Tuesday. Canada has retaliated with phased 25% tariffs on 155 billion Canadian dollars ($106.64 billion) of goods, while Mexico has signaled it will reveal details of its retaliatory tariffs later Monday.

Canada and Mexico are significant suppliers to the U.S. across the whole base metals complex, ranging from around 20% of copper imports to nearly 80% in zinc, though aluminum remains in particular focus, JPM said.

"25% tariffs on two of the U.S.'s largest trading partners is an adverse supply shock risking severe supply chain disruption while pushing inflation up and growth down," JPM added.

Compounding the hit to metals, the tariffs have strengthened the U.S. dollar--driven primarily by traders betting on higher inflation in the U.S. in the future, said ActivTrades' Ricardo Evangelista. A stronger greenback makes it more expensive for international purchasers to buy dollar-denominated commodities, posing headwinds for metals markets.

The Trump administration's 10% tariff on Chinese imports will particularly affect supply-sensitive materials like aluminum, Sucden Financial's Daria Efanova wrote. Aluminum volatility is likely to be even more pronounced than in the rest of the metals complex, she cautioned.

A willingness to impose tariffs on Canada and Mexico--U.S. free trade agreement partners--reduces the likelihood that other countries with free-trade-agreements will be exempted from further tariff measures, Citi analysts said. Combined with U.S. existing price premiums, pricing for metals in the U.S. versus metals elsewhere is likely to widen further, Citi said.

Citi expects U.S. commodities exchange Comex's pricing of copper to widen by more than $900 a metric ton compared with the LME.

Further tariffs are likely to follow. Trump has already pledged to raise European tariffs, and plans to implement targeted tariffs on aluminum, steel, oil and gas, with copper set to follow, bringing bearish expectations for global growth, industrial metals and oil, Citi wrote.

Write to Joe Hoppe at joseph.hoppe@wsj.com

(END) Dow Jones Newswires

February 03, 2025 07:14 ET (12:14 GMT)

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