Copper, Silver Futures Surge Amid Tariff Fears

Copper and silver futures in New York have exceeded international benchmarks as markets anticipate potential import tariffs on these metals following Donald Trump’s return to the White House. Experts have also warned that aluminum and steel could be significantly impacted, increasing uncertainty among investors.

Last week, front-month Comex silver futures were priced more than US$0.80/oz above the spot bullion prices in London. Likewise, front-month Comex copper traded at a premium of US$623/t over the equivalent futures on the London Metal Exchange. Experts explained that the increase reflects uncertainty about Trump’s trade agenda ahead of his Jan. 20 inauguration. 

Previously, the Washington Post reported that the administration is exploring tariffs on critical goods, including copper, a claim Trump has denied. CNN also reported that Trump is considering declaring a national economic emergency to justify broader tariffs. “Investors are focusing on strategies to manage inflation risks, fiscal challenges, and changes in trade policies,” said Ole Hansen, Head of Commodities Strategy, Saxo Bank.

These price gaps present opportunities for traders with physical inventories but also bring challenges for investors without access to deliverable metals. In the silver market, the availability of deliverable metal for Comex futures remains a concern. “The market is approaching a squeeze, and this risk is being overlooked,” said Daniel Ghali, Senior Commodity Strategist, TD Securities.

In addition to copper and silver, experts warn that aluminum and steel will be the metals most impacted by Donald Trump’s tariffs. Around 70% of the aluminum consumed in the United States is imported, with Canada supplying 60% of that total. Similarly, steel imports account for 24% of the US supply, with Canada contributing 25% and Mexico 15%. Experts explained that Trump’s 25% tariff will significantly increase costs, with steel prices projected to rise by US$100 to US$150 per short ton and the Midwest aluminum premium over the London Metal Exchange price potentially more than doubling, surpassing US$50. 

While higher prices could benefit six US-based smelters, Alexander Hacking, Analyst, Citigroup, cautioned that adjusting supply chains to accommodate these changes could take several years. “Equity investors are likely to view any windfall profits cautiously, interpreting the tariffs as either temporary measures or negotiating tactics,” Citigroup analysts noted. Citigroup cited Trump’s first administration as an example, noting that steel buyers stockpiled materials in response to similar tariffs, a behavior analysts expect to see again.