U.S. copper tariffs remain pending, traders grow increasingly cautious of copper bull market

According to Zhihui Finance APP, since Donald Trump returned to the White House, copper prices have soared significantly, due to a dramatic global inventory reshuffle over the risk that he may impose tariffs on this metal. But as Trump's second term is nearly halfway through, many bulls in the market are becoming wary: if he fails to deliver on his promises, prices could collapse.

Until just a few weeks ago, New York copper futures had continuously traded above the global benchmark set by the London Metal Exchange (LME), allowing traders to reap unprecedented profits by shipping copper to the US ahead of any tariffs taking effect. Conversely, inventories outside of the US have dropped sharply, and the ongoing wave of US-bound imports formed a feedback loop, helping push LME prices to nearly $15,000 per tonne last month—a record high.

However, with the midterm elections approaching, investors in various markets are questioning: if the Democrats perform strongly in the midterms, will that disrupt Trump’s trade agenda—or even prompt him to double down on tariffs? For copper bulls, if Trump is proven unwilling or unable to push through tariffs, the consequences could be extremely far-reaching.

Analysts at Natixis SA have warned that the tariff trade has created a bubble in the market for one of the world’s most important industrial commodities, and if tariffs are taken off the table, the bubble could burst quickly. Macquarie Group has said that in such a scenario, prices could crash to $10,000 per tonne; if tariffs are announced but traders are given a time window to ship more metal to the US, prices could surge as high as $18,000.

“I’ve never seen anything like this before—where the future price direction ultimately depends on one person’s decision,” said Alice Fox, Macquarie’s commodities strategist, in an interview.

As the midterms draw near, there are signs that traders are increasingly willing to bet tariffs won’t materialize, focusing their bets on the spread between New York Comex and LME copper futures. These markets have traditionally moved almost in sync, but since Trump first formally proposed tariffs on copper in February 2025, Comex prices—which would include the tariff burden if implemented—have had a significant premium over LME.

Traders can sell Comex contracts and buy LME contracts, bringing the two markets back in line. But according to Marc Bailey, CEO of one of the market’s largest brokers, Sucden Financial Ltd., until recently this kind of arbitrage activity had almost completely dried up. The reason: if Trump actually pushes through with tariffs, traders who sold Comex contracts could face huge losses.

But in recent weeks, Sucden has received inquiries from investors rekindling interest in this trade. At the same time, the gap between Comex and LME prices has collapsed—and this decline accelerated further after Reuters reported last month that Trump’s tariff plan was shelved over concerns about its inflationary impact.

“In the past few weeks, it seems like sentiment has started to shift,” Bailey said in an interview in London. “People are starting to consider dipping their toes back in.”

Reduced Shipments to the US

If this trend gathers momentum, investors’ increasingly widespread “anti-tariff” bets via the Comex spread could have a significant market impact—steadily counteracting the incentive for traders to ship more metal to the US.

In the physical copper market, according to ship tracking company Kpler, as the Comex spread collapsed, shipments of copper from Africa headed to the US have decreased. While doubts about tariffs are increasing, traders are also wary of one variable: Trump could suddenly announce tariffs after the midterms, before their shipments arrive in the US.

As the metal industry’s annual LME Week kicks off in London this weekend, the collapse of the Comex spread is fueling the debate: with energy prices surging, interest rates rising, and a weak stock market threatening demand prospects, will gravity eventually catch up to copper prices?

As these risks intensify, the distinct dynamics of US supply compared to the rest of the world provide traders with another reason to sell the Comex spread, according to Alastair Munro, metals strategist at Marex Group, another major metals broker.

Recently, intensifying supply tightness on the LME has led to higher near-term prices compared to Comex, shrinking the gap between the two contracts as they near expiration. For example, September-delivery contracts fell by over $600 per tonne in the month before delivery, leaving the Comex premium at less than $4 at close.

“There is greater willingness to sell New York and buy London because as contracts enter the delivery month, arbitrage naturally converges,” Munro said in a phone interview from London. “Arbitrage is just one aspect—more broadly, the willingness to short copper is growing in light of bearish macro views.”

A Polarized Debate

Admittedly, copper traders have previously been thrown into chaos by Trump on the tariff issue—the most painful episode being in July last year, when he imposed a 50% tariff on downstream copper products but left the commodity-grade metal traded on futures markets untouched.

This sent Comex prices plummeting, but until recently, they still carried a significant premium to LME, because Trump left room for future tariffs. Since then, the copper market has been locked in a polarized debate over whether he will ultimately impose tariffs or not.

While doubts about tariffs are growing, almost no one in the copper market expects him to completely rule them out—since doing so could send the vast stockpiles sitting at US ports flooding back onto the international market. A popular theory is that Trump’s silence on tariffs is a deliberate “strategic ambiguity” meant to prevent such a reversal.

However, given tariffs’ central role in Trump’s political agenda, some still expect he will act—as early as January 1, in line with recommendations from the US Department of Commerce made last year.

“The key uncertainty is US tariff policy,” said Grace Li, investment director at Shanghai Ducheng Private Fund Management Co. “Given the lack of visibility into the administration’s thinking, it’s difficult to make a direct directional call on whether to go long or short copper.”

A Rare Opportunity

US copper stockpiles have grown so large that it could take manufacturers years to work through them. Meanwhile, this surplus has created a rare opportunity for traders: buying up inventory while shorting Comex futures contracts to lock in a small profit. These so-called contango financing trades add another layer of complexity to the ongoing debate over supply dynamics and price outlook for next year.

Compared to the eye-watering profits from US import arbitrage, these returns are slim. Nevertheless, analysts at Bank of America say they’re sufficient to keep copper from flowing back to the global market—even if Trump relents on tariffs, they help underpin prices.

For anyone bearish on copper, the risk that Trump will still proceed with tariffs remains significant. According to the US Department of Commerce’s recommendations, tariffs could be rolled out in phases: 15% from 2027 and 30% from 2028.

This would mean copper continues to be sucked into the US, reigniting the global bidding war that pushed copper prices to record highs. With inventories in China—the largest consumer—already significantly depleted, if China is forced to restock while US imports surge, prices could spiral even higher.

“They might have thought this round of hoarding should have ended by now,” said Helen Amos, commodities analyst at BMO Capital Markets Ltd. “But what if they suddenly decide—‘actually, this will last another two years’?”