US copper tariffs are a bizarre strategy but highlight a real shortage

Trump signed an executive order late yesterday directing the Commerce Department to examine possible copper tariffs.

It’s a bizarre move given that copper is fungible and sellers can simply sell elsewhere. There is no-doubt going to be a push to improve US copper smelting and move that part of the supply chain out of China but putting tariffs on the mining and selling of copper isn’t going to accomplish anything, as foreign mines simply sell at the global price to whoever pays the most.

That said the White House official who outlined the order said:

“Forecasts based on demand from electric vehicles and AI point to copper shortages in the future.”

That’s the signal in the noise and something I’ve highlighted many times. Right now there is some uncertainty about traditional demand for copper given mixed economic signals but if China hits the stimulus taps in March, all the demand factors begin to come together. In addition, any large build-out of robots will need massive amounts of copper.

The order has sharpened that sentiment and copper miners are trading up 5% today, including Freeport-McMoran.

This article was written by Adam Button at www.forexlive.com.