Trump’s Copper Gambit Could Be His Riskiest Tariff Move

The U.S. imports about half of the copper it uses across a host of important sectors. (DENIS CHARLET/AFP via Getty Images)

President Donald Trump’s latest tariff salvo, a huge levy on copper imports, triggered the biggest single-day surge for the metal on record and could prove to be one of the most influential trade moves he has made since taking office earlier this year.

Copper futures prices eased from the all-time peak they reached on Tuesday, but are expected to remain elevated over the coming months after Trump said he was considering a 50% tariff on all imports of the metal. Copper was last marked at $5.52 a pound in U.S. markets, a near 25% increase from early April levels.

The new levy, which was double the market’s expectation, was expected to come in November, or later, after the deadline for completion of a so-called Section 232 investigation, ordered by Trump, on how imports affect national security. Commerce Secretary Howard Lutnick, however, said Tuesday that the new tariffs could be in place by the end of the month.

The U.S. imports around 50% of the copper it consumes each year across a host of important sectors, including housing, transportation, construction, and the generation of electricity. The near 1.7 million tons it runs through each year amounts to around 7% of global demand.

But that figure is likely to grow larger over the coming years, as the U.S. builds out the vast electrical infrastructure needed to power the nascent artificial-intelligence revolution.

“The accelerating shift toward clean energy, AI-driven digital infrastructure, and electrification is laying the foundation for sustained, structural demand growth,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.

“If supply continues to lag—constrained by underinvestment in new mines and refining capacity—copper prices are poised to remain volatile and trend higher,” he added.

The U.S. Energy Information Administration says domestic consumption will hit record highs this year and next. It expects overall demand will rise by 50% from current levels over the next 25 years.

In the near term, AI data centers are likely to require enormous amounts of copper to meet their capacity needs. Boston Consulting Group estimates data centers now using 82,000 megawatts of power will be eating up an extra 45,000 in 2029. That increase will require 1.2 million metric tons of copper, according to the Copper Development Association, a trade group.

“Copper’s superior conductivity is vital to powering the surge in electricity demand from data centers, and is also a key component in their buildout,” said LPL Financial’s chief technical strategist Adam Turnquist. “Upgrading global energy grids, electric vehicle production, and adding alternative energy sources are also long-term drivers of copper demand.”

Tariffs on copper will make all of those endeavors more expensive. It will take years for the U.S. to replace imported copper with new domestic production capacity.

Steep levies on copper will have an immediate impact on the housing market. The CDA estimates each new home contains nearly 440 pounds of copper in wiring, plumbing, and appliances. The metal is also found in roofing, gutters, and cladding.

Tariffs on lumber and steel, together with levies on other goods from Canada and Mexico, will add nearly $11,000 to the cost of a new home, the National Association of Homebuilders said earlier this spring. Copper tariffs will take that increase even higher.

Collectively, the cost increases will also filter through into inflation readings, both at the factory-gate level and in the consumer price index. That won’t only slow consumption in other sectors, but will also reinforce the case for the Federal Reserve to continue with its current “wait and see” approach to lowering interest rates.

Copper has long been described as “the metal with a PhD in economics,” given the link its price movements have to global industrial demand. Advancements in AI, electric vehicles and green energy investments, and battery technologies have not only solidified that reputation, but enhanced it.

Imposing tariffs on a component that is critical in the development of a new, tech-led economy seems risky. Adding an extra layer of costs to old-economy bellwethers like housing at a time of stubbornly high inflation seems even more so.

Write to Martin Baccardax at martin.baccardax@barrons.com