Democratic sweep leaves the copper tariff call with Trump

Copper's first read of the Democratic sweep in Tuesday's US midterms was that a refined-metal tariff had become less likely, but the decision that would release the metal stockpiled in the US belongs to the president, not to Congress.

The market moved before that distinction set in. Comex copper slumped towards a near four-month low of about $6.27 a pound before recovering to trade near $6.46, Saxo Bank's head of commodity strategy Ole Hansen wrote on Wednesday, as the Bloomberg Dollar Spot Index fell around 0.5%. In London, three-month copper on the London Metal Exchange earlier fell as much as 1.5% to its lowest since Aug. 3 before rebounding 0.5% to $14,103 a tonne by 11:15 a.m. GMT, Reuters reported.

Hansen's case rests on politics. After such a decisive defeat, and with affordability a growing concern, he wrote, "the likelihood of additional tariffs on refined copper may have diminished." That could reduce the incentive to hold large inventories in the US and eventually send metal back to international markets, easing the tightness in Chinese import premiums and LME spreads.

A presidential call

The tariff in question does not yet exist. Under Section 232 of the Trade Expansion Act of 1962, President Donald Trump imposed 50% tariffs on semi-finished copper products and copper-intensive derivatives from Aug. 1 last year, but left refined cathode, ores, concentrates and scrap untouched. His July 2025 proclamation directed the Commerce Secretary to report on domestic copper markets by June 30 this year so the president could determine whether a phased universal duty on refined copper, 15% from Jan. 1, 2027 and 30% from Jan. 1, 2028, "is warranted."

That leaves the outcome with the White House. Congress has partially delegated its constitutional power over tariffs to the president through Section 232, the Congressional Research Service notes, and some members have introduced bills to give Congress a stronger role in setting tariffs. A Democratic majority could pass one, but Trump keeps his veto, as Hansen points out, and overriding it takes two-thirds of both chambers. The new Congress is not seated until Jan. 3, two days after the proposed refined-copper start date.

Two paths follow. If the White House drops or defers the refined duty, the case for keeping metal in US warehouses weakens. Hansen expects that would ease premiums elsewhere, and Reuters noted that any announcement that tariffs would not be imposed would free up the overhang and weigh on the market. If the duty goes ahead, the incentive to hold metal in the US stays in place, and so does the tightness abroad.

For producers selling refined metal inside the US, such as Freeport-McMoRan (NYSE: FCX), which mines in Arizona, the tariff is the support case. Some analysts argue targeted tariffs could support US copper producers, while others warn they raise costs for US businesses, CRS notes. The US relied on imports for about 57% of its refined copper consumption last year, according to US Geological Survey estimates cited by CRS.

Shanghai shows how tight the market is outside the US. Spot cathode premiums there averaged 1,900 yuan a tonne on Wednesday, up 600 yuan and a new high for the year, according to Shanghai Metals Market, which said some processors have begun considering furnace shutdowns to cut raw material use. The Yangshan warrant premium rose $5 to $205 a tonne, SMM data show.

Even a full release would not add new supply. It would be "a redistribution of existing inventories rather than an improvement in global mine supply," Hansen wrote. He sees copper's longer-term uptrend as intact, though the election could bring a prolonged period of consolidation while traders reassess tariff risks, inventory flows and US demand.