After a short, but much needed reprieve, the 90-day tariff pause finally came to an end; on Monday, Trump announced hikes on tariffs from 10% to 25% towards both Japan and South Korea, setting the tone of what was to come for the rest of the week. Some countries suffered with higher tariffs (such as Brazil), while others saw mercy as trade negotiations neared a settlement. The S&P 500 shrugged off trade jitters after big tech rallied and Nvidia briefly hit a $4 trillion market cap – the CNN Fear and Greed Index is now signalling ‘extreme greed’… Crypto markets soared confirming the risk-on appetite.
The main story which dominated the metal world came late on Tuesday, as Trump floated a 50% tariff on copper imports, which was subsequently confirmed the following day via Truth Social.
Market bedlam ensued…
LME/CME arb experienced extremely volatility – Sep vs 3M arb whipsawed from $1,200 prior to the announcement, to a high of $3,111, before closing around $2,400 that evening.
LME 3M dropped $300 in an hour.
LME C-3M collapsed from 51.31b on Tuesday, to 21.57c Friday evening.
LME 3M-Dec25 eased from 10.24b on Tuesday, to 21.25c Friday evening.
LME 3M-Dec26 eased from 24.76c on Tuesday, to 111.25c Friday evening.
LME spread tightness abated as market participants naturally looked to go short of LME (and long CME). Stock levels also alleviated the tightness as material continues to flow into LME warehouses, after being at yearly lows in June – metal arrived in Hong Kong warehouses for the first time since joining the LME network.
Additionally, monthly index rolls exacerbated the lending throughout the week. The market had been pondering a 25% tariff (or less) on copper for months, leaving many participants surprised as the news of a 50% tariff dropped. Reports later in the week suggested these tariffs may also be extended to refined and semi-finished products, adding to the magnitude of disruption.