Trump’s Tariff Threat on Copper and Aluminum Imports Could Raise Costs for US Consumers, Analysts Warn

President Donald Trump’s proposed tariffs on US copper and aluminum imports may lead to higher prices for American consumers due to insufficient domestic production, industry experts say.

In a recent speech, President Donald Trump announced plans to impose tariffs on aluminum and copper imports, critical metals used in US military hardware production, as part of his broader strategy to incentivize domestic manufacturing. “We have to bring production back to our country,” Trump emphasized.

However, analysts and industry participants warn that this move could backfire, leading to increased costs for US consumers. The US currently relies heavily on imports to meet its copper and aluminum demands. According to BNP Paribas, the US imports 38% of its copper needs and depends on foreign suppliers for 82% of its aluminum consumption, primarily from Canada and Mexico.

Market Reactions and Rising Premiums

Following Trump’s announcement, copper prices on COMEX surged by 0.9% to 4.2705perpound(4.2705perpound(9,415 per metric ton), widening the premium over London Metal Exchange (LME) prices to $389 per ton. This spike reflects market uncertainty and the potential for disrupted trade flows.

Natalie Scott-Gray, senior metals analyst at StoneX, noted that US manufacturers may have no choice but to pass on higher import costs to consumers until the domestic refining and smelting industries receive significant investment.

Challenges for Domestic Smelters

The US aluminum and copper smelting industries have faced significant challenges in recent years, with many facilities shutting down. Daniel Morgan, an analyst at Sydney-based Barrenjoey, highlighted that restarting these operations would require substantial infrastructure upgrades and new power contracts, among other measures.

Potential Impact on Trade Flows

Trump’s tariff plan could reshape global trade dynamics. While Canadian aluminum producers like Rio Tinto and Alcoa may not face direct revenue losses, the additional costs are likely to be passed down to automakers and, ultimately, US consumers. Alcoa CEO William Oplinger recently estimated that a 25% tariff on Canadian aluminum exports to the US could add 1.5billionto1.5billionto2 billion in annual costs for American customers.

India, another key aluminum exporter to the US, is also bracing for potential disruptions. B.K. Bhatia of the Federation of Indian Mineral Industries warned that tariffs could compound challenges for aluminum producers, especially with Europe and the UK considering carbon taxes.

Copper Industry Concerns

The copper industry is equally wary. John Fennell, CEO of the International Copper Association Australia, noted that the US, as a net copper importer, would feel the impact of tariffs. However, he suggested that such measures might accelerate the development of new mines, such as Rio Tinto’s Resolution project in Arizona.

Freeport-McMoRan CEO Kathleen Quirk expressed concerns about the inflationary effects of tariffs, though the company itself would remain unaffected due to its domestic sales strategy.

Lessons from Past Tariffs

During Trump’s previous presidency, steel and aluminum tariffs had a limited impact on Japan, the world’s third-largest steel producer. Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting, explained that Japan’s focus on value-added specialty products shielded it from significant losses. He expects a similar outcome this time, as these products are difficult to substitute and less likely to be targeted.