Forgive yourself if you haven’t given much thought to the copper futures market recently. But yesterday, the price of contracts for the not-very-precious metal spiked upward viciously because—you guessed it—President Trump announced a new tariff plan.
“Today we’re doing copper,” Trump said, while floating the notion that the U.S. should impose a 50% tariff on imported copper.
Copper prices were up 17% in New York on Tuesday but fell back this morning. Futures contracts were $5.54 per pound this morning, up 8% over the previous five days. There hasn’t been this much drama in the copper market since the financial crisis of 2008.
Analysts, investors, and economists are agog.
Trump’s 50% tariff would therefore be a straightforward price increase imposed on U.S. businesses and consumers. Copper prices actually fell in London this morning as producers anticipated reduced demand from the American market.
This poses a problem for Trump, who has been bullying U.S. Federal Reserve Chairman Jerome Powell to lower interest rates. But Powell won’t be lowering rates if the spiralling price of copper is lifting inflation. Research by UBS and Pantheon Macroeconomics—seen by Fortune this morning—suggest that a copper tariff would add 0.02% to 0.03% onto the inflation rate. That’s not a huge amount—so it might still give Powell the wiggle room he needs to cut the rate in September despite the copper problem.
Not just a “bigger deal” for the markets, of course. It could be a political problem for the president. Somehow, Trump will have to sell more expensive copper and drugs to a voting public that, presumably, would rather not pay more for these essentials.
Today, the smart money is saying that this is all drama for drama’s sake. It’s waiting for the actual tariff deals to get cut before it believes the headlines. S&P futures were sitting placidly this morning, up only 0.12%. It’s almost as if investors don’t believe that Trump will ultimately go through with these plans.
Here’s a snapshot of the action prior to the opening bell in New York:
