U.S. copper tariffs threat met with shrugs, skepticism

U.S. threats to impose 50% tariffs on copper imports have been met with shrugs by Canadian mining companies and skepticism by analysts, though long-term risks remain.

U.S. President Donald Trump’s declaration Tuesday of the coming tariffs came before a study on their need had been released, and the commitment included no details on timing or whether any countries might be exempt.

Despite the lack of clarity, Canadian mining companies say they don’t expect to be affected, as copper concentrates are largely shipped overseas, primarily to China.

The raw resources head there because China has built up massive smelting and fabricating operations, accounting for 75% of added smelter capacity since 2000 — and virtually all additions in the past five years — as well as 80% of fabrication growth since 2019, according to Wood Mackenzie.

China’s growing dominance in metal processing is exactly why the U.S. — even before a potential second Trump term — has moved to encourage more domestic capacity.

The rush to impose steep tariffs immediately, even as capacity will take years to develop, means U.S. businesses and consumers will pay the price, said Michael Dobner, national leader of economics and policy practice at PwC Canada.

“What I expect is that most of that tariff will be paid by U.S. companies who are buying that copper,” he said in an interview.

Because copper is essential to so many products, companies have little choice but to continue relying on imports, including from Canada, he said.

“I expect most of it will fall on U.S. companies, and so the impact on Canada in the short term will not be significant.”

Canadian aluminum producers have similarly continued to sell into the U.S. despite high tariffs due to limited domestic U.S. production capacity. However, steel producers in Canada have been hit harder, as there is more excess capacity in the U.S., Dobner noted.

The potential for higher consumer costs due to Trump’s tariff policies raises questions about their viability, and explains some of the muted market reaction, said Derek Holt, head of capital markets economics at Scotiabank.

“Markets may be waiting to see proof and even then waiting to see if the moves are durable, given Trump’s well-documented erratic ways,” Holt said in a note.

“Simply put, markets have a tough time viewing his moves as credible,” he said. “There is no sensible rationale for these measures that American consumers and businesses will pay for.”

Canadian exports of copper to the U.S. totalled $5.7 billion in the 12 months through May — a lighter potential impact than tariffs on steel and aluminum, where Canada exported $34 billion worth of metal to the U.S., BMO senior economist Robert Kavcic said in a note.

Quebec, home to Canada’s only copper smelter, owned by Glencore plc, would be most affected. But broader repercussions are possible, Kavcic said.

“Bigger picture, even if a copper tariff would be relatively contained, it would be another shot that impacts business confidence more broadly.”

The tariff threat has already pushed copper prices higher in the U.S., and given copper’s central role in the economy, those price increases could dampen broader economic growth, Dobner said.

“What we will see is indirectly, potentially, that could drive the U.S. to a less vibrant economy, pushing its economic growth even lower.”