The US government will impose a 50% tariff on imported copper starting from August, causing significant unease among global manufacturers. As inventories dwindle and existing contracts near their expiration, manufacturing executives are urgently hoping for clarity on President Trump's tariff policies.
Analysts warn that since copper is widely used in EVs, chips, defense equipment, household appliances, and wires, permanently raising copper tariffs will have a severe impact on prices and demand. According to Morgan Stanley estimates, imported copper accounted for approximately 53% of US copper demand last year.
John O’Leary, president of Daimler Trucks North America, expressed that companies are increasingly frustrated due to the unclear tariff policies. While no tariffs would be ideal, if tariffs are indeed imposed, the government should inform companies of the details so they can plan accordingly and strive to survive.
O'Leary has been negotiating with suppliers who are citing tariffs as a force majeure to raise prices in long-term aluminum and steel procurement agreements. He pointed out that so far, long-term contracts have been protecting Daimler, but at some point, these contracts will expire and need to be renegotiated. This requires companies to plan ahead as early as possible.
Price Shock
The White House has not yet released details on copper tariffs, such as whether the tariffs will include semi-finished copper products like copper wires and copper billets, and whether the US might impose restrictions on copper scrap exports. However, analysts say that before the inventories in copper producers' own warehouses are depleted, copper end-users are unlikely to be fully impacted.
Amy Gower, a commodity strategist at Morgan Stanley, predicts that the buffer period created by the US's recent extra purchases of copper cathode will last approximately six to nine months. However, Jake Seltz, a portfolio manager at Allspring Global Investments, warns that companies will eventually need to raise prices to offset higher costs, leading to future demand destruction.
Barclays estimates that a 50% copper tariff could increase the cost of gasoline vehicles by $110 and EVs by $700, as this metal is used not only in manufacturing wire harnesses but also in batteries, engines, and inverters.
The Aerospace Industries Association, a US trade organization, also estimates that due to the complexity of the aerospace and defense supply chains, finding, certifying, and switching to new suppliers of critical minerals could take up to 10 years.
