For those who missed it, President Trump announced 50% tariffs on copper imports last week. The market reacted sharply...sort of. With copper imports now 50% more expensive, a standard market reaction would have been to price US copper at a ~50% premium to the global price. Instead, the market pricing jumped to about a 20% premium, implying that the market still doesn't believe that this will actually stick - despite the direct statements from Trump and Lutnick, and the trademark colorful Truth Social post that accompanied both.

This rhymes with the situation we just went through in aluminum. As Trump declared that he was raising tariffs, the markets stuck to their "TACO" beliefs and were slow to reflect reality. The chart below is worth going through slowly. The y-axis is the premium you pay to buy the metal (red=aluminum, blue=copper) in the US versus the world price. The shaded bars reflect the periods between when expanded tariff rates were announced and when those new tariff rates were in effect. What this chart shows is the aluminum market never fully reacted until the money was literally being collected, but then it ultimately priced in the tariff rates.

The natural question is whether we should expect fireworks in US copper prices around Aug 1, the date Trump mentioned in his post. No one knows for sure, but we like betting on it quite a bit. If the tariffs happen as promised, you could see a ~20% pop in US copper prices in a short amount of time. And, there is limited short-term downside as so much "walking back" is already implied in the price. While we expect the ultimate direction of copper will be down in the medium term, as higher average global costs meet weaker global growth to weigh on demand, in the short term Trump skepticism has created a nice risk/reward opportunity that is also uncorrelated to almost everything.