U.S. President Donald Trump’s second trade blitzkrieg this week, after resuscitating his plan to enact sweeping tariffs on much of the world, was to announce 50 percent import duties on copper, freaking out the market as well as every company that uses the third-most important industrial metal.
Trump casually remarked this week that his administration had concluded its Section 232 investigation into copper imports, which ostensibly pose a national security threat and will be addressed with steep tariffs starting Aug. 1. It was the first conclusion in several ongoing national security trade investigations. Trump also mooted the idea of 200 percent tariffs on pharmaceuticals, though those duties would come later, if they come at all. That Trump opted for hefty tariffs on copper, as he had previously on imports of steel and aluminum on the same national security grounds, suggests that the other sectors under investigation—including lumber, semiconductors, and jet engines—will face higher levies as well.
U.S. President Donald Trump’s second trade blitzkrieg this week, after resuscitating his plan to enact sweeping tariffs on much of the world, was to announce 50 percent import duties on copper, freaking out the market as well as every company that uses the third-most important industrial metal.
Trump casually remarked this week that his administration had concluded its Section 232 investigation into copper imports, which ostensibly pose a national security threat and will be addressed with steep tariffs starting Aug. 1. It was the first conclusion in several ongoing national security trade investigations. Trump also mooted the idea of 200 percent tariffs on pharmaceuticals, though those duties would come later, if they come at all. That Trump opted for hefty tariffs on copper, as he had previously on imports of steel and aluminum on the same national security grounds, suggests that the other sectors under investigation—including lumber, semiconductors, and jet engines—will face higher levies as well.
By raising taxes on U.S. businesses and consumers, the administration seeks to eventually drive investment into domestic copper mining, smelting, and other productive activities. But all that is guaranteed in the short run are higher prices, especially for businesses that rely on steel and copper. U.S. copper prices hit a record high after Trump’s tariff announcement.
“I think it’s economic vandalism,” said Veronique de Rugy, an economist at George Mason University’s Mercatus Center. “It’s economic vandalism in all the ways you can use ‘vandalism.’ It’s just not well thought through, and it’s counterproductive.”
The notion that copper imports, like many of the other goods already or soon to be subject to import taxes under Section 232 of the 1962 Trade Expansion Act, are a question of national security is becoming harder for the Trump administration to seriously maintain. It has already stretched the use of that national security exception for tariffs to the breaking point and will likely go further with additional sectors.
When announcing the investigation in February, Trump said partial reliance on foreign sources of copper “poses a direct threat to United States national security and economic stability.” A month later, in announcing new measures to streamline domestic mining, he went further: “Our national and economic security are now acutely threatened by our reliance upon hostile foreign powers’ mineral production.”
The “hostile powers” that provide almost the entirety of U.S. copper importsabout 900,000 metric tons last year, are Canada, Chile, Peru, and Mexico. The United States has a free trade agreement with each one of them—or did. (The divorce between reasonable grounds for tariff action under U.S. law and Trump’s approach to trade was made patent late Wednesday, when he threatened Brazil with 50 percent tariffs because that country is trying its former president for launching an abortive coup after losing an election.)
As for the copper problem that the new tariffs are meant to address: The United States does import nearly one-half of the refined copper it uses, while it mines just over a million tons itself yearly. And demand for copper is expected to grow sharply—not just for traditional uses such as construction and electricity but also due to the rapid growth of electric vehicles (batteries use a lot of copper), renewable energy (wind turbines and solar panels use copper), and artificial intelligence (data centers run on copper).
S&P Global concluded in a big report last year that if U.S. copper production doesn’t somehow get boosted, import dependency will rise to about 60 percent over the next decade. Even in the best-case scenario, whether because of tariffs or despite them, getting a few pending mining megaprojects online this decade would still leave U.S. import dependency at about 30 percent. But all those imports would be massively taxed.
It’s a global issue: Because of the simultaneous uptake of new energy technologies and AI, as well as traditional economic growth, global copper demand is expected to rise by 70 percent by 2050.
But the problems with U.S. copper supply are not a result of any flood of cheap, foreign copper. And tariffs—which would be paid by U.S. importers and businesses, not foreign countries—will do little to change that. The United States has bucketloads—actually, massive truckloads—of copper reserves and resources in the ground, more than Australia and Canada combined.
Yet mining output, both in the United States and globally, is not keeping up with demand. That’s partly because older mines are chasing lower-quality ores and partly because it takes years, if not decades—29 years on average in the United States—to get new mining projects from planning to production.
It’s not just the mines, though. Another part of the decline of the U.S. copper industry this century is in smelting and refining, the secondary processes. U.S. capacity has basically halved since 2000, meaning even the ore the United States digs out of the ground must often be sent abroad for processing. Unless the tariffs somehow address this—and it is possible that if mines start opening up, investment will start to flow into smelters and the like—then there is no genuine solution.
The Trump administration’s March executive order to streamline mining and mineral production on federal lands might start to address some of the issues facing the copper industry. And mining companies say they are bullish on investing in the United States, especially with big protectionist walls to huddle behind.
But even industry stalwarts, such as BHP, admit that they have to keep moving back their projections of new mining projects coming online for one reason or another. There is no single switch to flip.
What’s remarkable about the Trump tariffs is how counterproductive they already are. There was a flood of imports of copper into the United States early this year in an attempt to get ahead of expected tariffs. That boosted domestic stockpiles but presumably was the opposite of what the administration intended. And with the price of copper increasing, the construction of data centers for AI, which is meant to be one area where the United States competes with China, will become more expensive.
What’s more, big suppliers such as Chile and Mexico said this week that they are looking to shift exports to other massive buyers of copper that don’t have tariffs. As if gobbling up half the world’s copper weren’t enough, China’s appetite for more copper isn’t really slowing down. Electric cars, wind turbines, solar farms, and big cities all require huge quantities of the metal.
“The administration thinks people are going to be on board with higher costs or shortages,” de Rugy said. “The one mandate they had was the American people wanted lower prices. So it is weird to go about it in this way.”
One thing that has become clear with Trump’s use of tariffs, both in his first term and this one, is that his desire to force a return of U.S. manufacturing at the cost of imposing short-term costs on producers and consumers puts the cart before the horse. Copper is pricier now, but any additional output will likely come at the end of the decade, if then. Pharmaceutical supply chains take years to reproduce, but the tariffs may come sooner. There is a race to dominate semiconductors, but making their very manufacture more expensive years before any new factories can be built is seemingly suboptimal.
“This is the failure of their whole enterprise. Even if you are on board with the program, what you need to do is get the process started, and then you put the tariffs in place,” de Rugy said. “I am just baffled.”
