The Trump administration announced a 50% tariff increase on copper, and the U.S. siphoning effect is expected to weaken [SMM Macro Weekly Review]

   Macro-wise, the market's core focus is on the trajectory of Trump's announced policy to impose a 50% tariff on imported copper. Since early July, Trump has continuously sent signals of strengthening trade protectionism, not only by signing the "Big and Beautiful" tax reform bill but also by sending tariff letters to multiple countries. On July 9th, he explicitly stated that the copper tariff would take effect on August 1st without any extension, significantly increasing market uncertainty. The LME-COMEX price spread has exceeded $2,500/mt, weakening market expectations for the US to siphon off copper cathode. Meanwhile, there is significant disagreement within the US Fed regarding the inflation spillover effects of tariffs, with the June meeting minutes signaling the exclusion of an interest rate cut in July, further eroding market risk appetite. This week, LME copper has repeatedly tested the $10,000/mt threshold, while SHFE copper has also fluctuated above the 80,000 yuan/mt level.

  On the fundamental side, if the 50% tariff is fully implemented, it may force the US to switch to domestic procurement, loosening copper supply in non-US regions. However, the market is currently grappling with the outcome of the tariff's final implementation and the progress of major copper-producing countries like Chile in seeking exemptions, lacking clear directional guidance in the short term. The spot market is awaiting clarification on key policies. Domestically, under tariff expectations, the market's anticipation for a narrowing of the high backwardation structure of SHFE copper has increased, prompting suppliers to sell off spot cargoes in large quantities, leading to a significant decline in spot premiums during the week.

  Looking ahead to next week, under the expectation of US tariffs, the LME structure is expected to revert from backwardation to Contango, with the weakening US siphoning effect causing LME copper prices to encounter resistance. It is anticipated that LME copper will fluctuate between $9,600-$9,800/mt next week, while SHFE copper will fluctuate between 77,000-78,500 yuan/mt. On the spot front, next week marks the delivery period for the SHFE copper 2507 contract. With continued weakness in both domestic supply and demand, and some domestic smelters canceling exports, domestic premiums will continue to face pressure. It is expected that spot prices against the SHFE copper 2507 contract will range from a discount of 80 yuan/mt to a premium of 220 yuan/mt.