Friday’s threat by President Donald Trump to slap even more tariffs on Chinese goods carried over to the market this week.
President Trump told reporters onboard Air Force One Friday that nearly $500 billion in additional Chinese goods could come under U.S. tariffs soon. Washington will act on $200 billion of tariffs “very soon depending on what happens,” Trump said. “I hate to do this, but behind that, there is another $267 billion ready to go on short notice if I want.”
As expected, copper prices fell on Monday as the markets reacted to the president’s comments.
The red metal bounced back in early trading this morning thanks to the euro gaining versus the dollar as concerns about Italian debt helped ease the market a touch. Despite the dollar softening, many investors remain cautious about any further escalation in the trade war with China.
“The trade dispute is not going to disappear. The market still does not fully understand this and has not completely priced this in,” Commerzbank analyst Eugen Weinberg told Reuters, adding that he expects to see larger losses.
“If a large proportion of Chinese exports to the U.S. are subject to penalties, there will be a massive impact on trade flows and it will probably change companies’ investment plans.”
Well-known research and consultant company Wood Mackenzie estimates the expansion of the tariff list could raise the impact to around 1 percent of total Chinese copper demand, as many copper intensive goods are included in the extended list.
China is the world’s largest consumer of copper, accounting for nearly half of global demand estimated at about 24 million tons this year. China’s copper imports fell 6.7 percent from a month ago to 420,000 tons in August.
“The markets remain choppy and uncertain with seemingly no discernable trading pattern between one session and the next,” Matt France, head of institutional sales for metals in Asia at Marex Spectron, said in a note.
Copper opened this morning just under $2.62 a pound. Benchmark copper on the London Metal Exchange closed 0.4 percent down at $5,910 a ton, a loss of about 20 percent since hitting a 4 1/2 year high of $7,348 just in June. The LME level crashed to a 14-month low of $5,773 on August 15.
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