Copper: Tariff Distortions to Fade, Prices Likely to Drift Lower – TD Securities

TD Securities analysts noted that the current strength in the copper market is not driven by a genuine global supply shortage, but rather by speculative positioning, tariff-related arbitrage activity, and supply disruption headlines. As the distorting effects of these temporary factors gradually fade, copper prices are expected to face downward pressure.

**Shifting Tariff Expectations Trigger Sharp Volatility**

Recent copper price action has been heavily swayed by expectations of U.S. trade policy. In late July 2025, the U.S. government unexpectedly excluded refined copper—the most heavily imported category—from its tariff list, imposing only a 50% tariff on copper semi-fabricated products. This triggered a single-day plunge of 20% in COMEX copper futures, while the premium of U.S. copper prices over the London Metal Exchange narrowed sharply from a previous 28%. The decision caught traders, who had broadly anticipated comprehensive tariffs, off guard and underscored the massive price disruption caused by policy uncertainty.

**Speculation and Arbitrage Provide Short-Term Support**

Despite the selloff, copper prices subsequently rebounded to near record highs. Market reports indicate that optimism over artificial intelligence helped push bullish positioning in COMEX copper futures to its most elevated level since December 2020. Meanwhile, traders noted that if the U.S. government could still impose tariffs on refined copper in the future, it would incentivize merchants to ship copper to the U.S. ahead of time, creating a fresh arbitrage window. This policy-driven rush to move shipments, rather than actual consumption demand, is becoming a key factor underpinning copper prices.

**Analysts Warn of Correction Risk**

TD Securities analysts emphasized that once the tariff arbitrage window closes or supply disruptions ease, prices currently supported by speculative sentiment will be difficult to sustain. According to market reports, if the U.S. Commerce Department subsequently recommends a 15% tariff on refined copper starting in 2027, it could intensify supply disruptions in the near term, but over the long run, copper prices lacking support from real demand growth face significant correction risk. Investors should be wary of a "buy the rumor, sell the fact" market reaction once policy is implemented.