Copper Spread Highlights Potential Tariffs Under Trump

The price difference between U.S. COMEX copper futures and London Metal Exchange prices has emerged as a market indicator reflecting the possibility of additional tariffs on refined copper by President Donald Trump. Last week, copper futures approached $6.90 per pound, reaching an all-time high. CNBC reported that the premium between COMEX and LME prices is reflecting the real-time risk of tariffs on refined copper. Société Générale analyzed that the current premium suggests a 14.6% chance of a 15% tariff by January 2027 and a 37% chance of a 30% tariff by January 2028. Copper, an industrial metal used in construction, electronics, transportation, and power grids, can see its prices and supply flows affected by changes in tariffs. The price difference between COMEX and LME has been used as an arbitrage tool, and currently, the potential tariffs under Section 232 of the U.S. Trade Expansion Act are acting as a key factor driving this price difference. The U.S. has already imposed a 50% tariff on certain semi-finished copper and high-copper-content derivatives, and the Department of Commerce has recommended a phased universal tariff on refined copper. The market interprets the COMEX premium as a probability of policy changes, and as the price difference widens, the incentive to expedite copper shipments to the U.S. increases. U.S. copper imports reached over 200,000 tons in July, marking the highest level in 12 years.

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