Copper carve-outs predicted amid Donald Trump 50 per cent tariff hit
The latest salvo in Washington’s global trade war has immediately put Canberra on alert, with Jim Chalmers concerned over the proposal to slap the transition metal with a 50 per cent tariff.
Chile may receive a carve out from Donald Trump’s surprise 50 per cent tariff on copper, boosting the fortunes of BHP and Rio Tinto, as traders evaluate the likelihood a similar levy could rock the critical minerals sector.
BHP and Rio jointly own the world’s largest copper mine at Escondida in Chile, which along with Canada, exports supplies to the US.
Analysts at Bernstein said all three economies may receive exemptions once the US President’s rhetoric was pinned down to a more realistic working policy.
“The tariff... simply adds cost to US manufacturers,” Bernstein said. “Therefore, we think logic ultimately prevails, and the policy is radically transformed - keeping 50 per cent on everyone else but exempting ‘friendly trading partners’ Chile, Canada and Peru from the tariffs solves the problem.”
US copper futures jumped 13 per cent to a record high of $US5.6450 a pound early Wednesday Australian time, marking the biggest one-day surge since 1968. However, the three month LME contract in London was little changed at $US989 a tonne as traders hedged their bets over the duty which could start on August 1.
Citi said the market will substantially discount the 50 per cent levy due to expected exemptions.
“We see Chile, Canada and Mexico likely all eventually securing a lower 25 per cent rate as key partners and US copper import sources and because of the excess US copper imports through the first half of 2025 which we estimate totalled 400,000 tonnes,” Citi said.
“We think this is a watershed moment for the copper market in 2025 as imminent flagged tariff implementation should abruptly close the window for further significant US-bound copper shipments (possibly for the rest of 2025),” the broker added.
The Trump administration in May fast-tracked a long delayed copper project in Arizona controlled by Rio, and backed by BHP, capable of meeting up to 25 per cent of total US copper demand annually.
Copper has been targeted under sector-oriented tariffs applied under Section 232 of a 1960s trade law.
The same levy or higher could be applied to other metals and mineral imports, Citi said.
Commodities that could be hit include zinc, nickel, tin, palladium, platinum and lithium.
The Minerals Council of Australia said it opposed the imposition of US tariffs on mineral exports, arguing they disrupted global trade, undermined investment confidence, and increased costs for consumers including Americans.
Morgan Stanley said many questions remained.
“A 50 per cent tariff would also add $US5000 a tonne or $US2.25 a pound to US copper prices, which would bring risks of demand destruction with Comex copper now at an all-time high,” the broker said.
“There are also questions around whether there would be any exemptions, e.g. Chile exported over two million tonnes of refined copper in 2024, and so could in theory fully supply the US, at least for its refined copper needs.”
While Treasurer Jim Chalmers said Australia’s exports of copper to the US were “actually quite small”, he said the imposts “were bad for the American economy, the Australian economy and the global economy and this extra element of unpredictability comes at a very unwelcome time.”
As the trade war between the US and China heats up, both nations want assured access to key commodities such as copper, which is used in aircraft, naval vessels, wiring for guidance systems and ammunition, as well as being core to renewable energy technology and batteries.
Mr Trump has previously imposed 25 per cent tariffs on all steel and aluminium imported into the US, with BlueScope seeking diplomatic talks with Washington over the trade stoush.
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