Explaining the ‘copper conundrum’ in the wake of Trump’s 50% tariff threat

View: Source

Call it a copper conundrum: with a 50% US tariff on refined copper imports set for 1 August, the global copper market is already seeing distortions.

The premium for copper in the United States over the London Metal Exchange (LME) has widened, fuelling a rush of shipments into the US ahead of the new tariff.

According to UBS, US copper imports have soared by 130% so far this year, despite flat underlying demand, as traders look to lock in metal at current prices.

UBS estimates that by the end of July, the US could be holding an extra 500,000 to 700,000 tonnes of copper, equivalent to roughly 30-40% of annual US demand.

This surge in inventory is expected to reduce US imports significantly for at least six to twelve months as stocks are gradually run down.

Copper that would have headed for US shores is instead likely to be redirected to other major markets, notably China and Europe, says UBS.

Global inventories tell their own story. UBS reports that stocks at the LME have started to rise again, while Chinese inventories stabilised after a rapid drawdown earlier in the year.

Meanwhile, US Comex inventories have jumped by 130,000 tonnes so far in 2025, offsetting some declines elsewhere. UBS warns there could be further increases in US stockpiles once tariffs take effect, which could temporarily put a lid on prices.

There’s speculation about whether US buyers might try to bypass the tariff by importing more copper products rather than refined copper, but UBS doubts this will have much impact, given that the broader aim of the tariff is to support US manufacturing.

Looking forward, UBS sees limited risk of a severe price drop for LME copper as these inventory shifts play out, expecting instead a period of consolidation.

The bank maintains a positive view on copper’s long-term prospects, pointing to ongoing strong demand and supply constraints, and sees any price weakness as a buying opportunity for investors.