The threat of US tariffs on copper imports has sent shockwaves through the market, widening the gap between CME and LME copper contract prices to record levels. Traders have already begun factoring in potential tariffs, despite former President Donald Trump suggesting they will take longer to implement than the aluminum and steel duties announced earlier this week.

With copper prices in the US surging, traders are scrambling to move metal into the country, betting on further price increases. However, if the final tariffs fall short of expectations or global economic conditions deteriorate, the recent spike could unwind just as quickly.

CME-LME Arbitrage at Record Highs

The price difference between CME (Chicago Mercantile Exchange) copper contracts and LME (London Metal Exchange) contracts has exploded, with CME copper now carrying a premium of over $1,200 per tonne, more than 10% above the LME price.

• US copper prices have surged more than 20% this year, reaching their highest levels since 2024.
• In contrast, LME copper prices have risen by just 10% year-to-date.

The market is essentially pricing in an imminent tariff-driven supply squeeze in the US, despite no official confirmation of when or how the measures will be implemented. If the tariffs materialize, New York copper prices could rise even further. However, any sign of weaker-than-expected tariffs or a broader economic slowdown could trigger a sharp reversal in this arbitrage play.

A Rush to Stockpile Copper in the US

The expectation of tighter copper supplies in the US has set off a rush to move metal from global LME warehouses to the US, taking advantage of the widening price gap.

This trend mirrors what happened during Trump’s first presidency, when tariff uncertainty led to a surge in CME copper stockpiles, followed by a sharp destocking cycle once the situation stabilized.

CME copper stocks have been steadily increasing since Trump’s recent election win, now surpassing 100,000 tonnes. The US remains heavily dependent on copper imports, with 45% of domestic consumption sourced from abroad.

• Chile is the US’s largest supplier, accounting for 35% of imports.
• Canada follows at 26%.

In 2024, the US imported around 800,000 tonnes of refined copper, while domestic production stood at 850,000 tonnes.

Doctor Copper: A Warning for the Global Economy?

Copper is often called “Doctor Copper” due to its ability to reflect global economic health. While short-term tariffs could drive prices higher, the bigger picture remains uncertain.

• If tariffs are implemented, expect an initial price surge as traders rush to secure supply before duties take effect.
• However, a prolonged trade war could be bearish for copper, slowing global growth and keeping inflation higher for longer.

Should US inflation remain persistent or even rebound, the Federal Reserve may delay or even increase interest rates, further weighing on copper demand from key sectors like construction and manufacturing.

Meanwhile, China—the world’s largest copper consumer—is already struggling to revive its economy. If a prolonged US-China trade war unfolds, copper demand could weaken globally. However, Beijing may respond with aggressive stimulus measures, which could stabilize copper prices and limit downside risks.

What’s Next for Copper?

The record-high CME-LME spread reflects deep uncertainty in the copper market. Traders are bracing for a potential tariff-driven price spike, but the longer-term outlook hinges on trade policy decisions, economic growth, and central bank actions.

If tariffs are implemented aggressively, US copper prices could continue their rally. But if global economic conditions weaken or trade tensions ease, the current price surge may be short-lived.

For now, the copper market remains on edge, with traders watching closely for the next policy move that could shape the industry’s future.