Mike McGlone: Copper Surge & Trump’s 50% Tariff Explained

Michael Fox interviews Mike McGlone, Bloomberg Intelligence's Chief Commodity Strategist, to analyze the recent surge in copper prices triggered by President Trump's announcement of a 50% tariff on copper imports to the U.S. Mike explains that this tariff move is part of Trump’s emboldened economic strategy, supported by robust U.S. stock market performance. They compare the current copper market turmoil to the 2008 financial crisis, noting how economic signals—like soaring gasoline prices then—can precede downturns, while now copper prices reflect tariff-driven distortions amid disparities between U.S. and global markets.

Mike contrasts copper and oil’s roles as economic indicators, highlighting oil’s visibility due to transportation reliance, whereas copper’s importance is growing with electrification trends. He points out copper has outperformed crude oil since 2008 and that the Bloomberg All Metals Index, which includes copper, has excelled thanks to factors like storage ease and stable backwardation.

Discussing market dynamics, Mike outlines that while China faces deflation and weakening copper demand, U.S. copper prices are inflated by tariffs and domestic supply efforts. He forecasts a likely drop in copper prices toward $8,000 per metric ton, but with tariffs and the stock market potentially keeping prices above $10,000 temporarily. Traders are adjusting positions in anticipation of tariff impacts and corrections.

Forecasting a copper price correction, Mike warns that the current high prices are unsustainable given underlying economic weaknesses, including Chinese slowdown and possible U.S. market corrections, potentially causing a significant price collapse by year-end unless the U.S. stock market remains buoyant. He also explains that removal of tariffs would likely cause prices to fall to about $4.50 per pound due to increased supply, emphasizing that technological advances and resource substitution—especially amid the shift to electric vehicles (EVs) and renewables—could offset some tariff effects.

On the interplay between copper tariffs and the EV transition, they agree that tariffs may slow electrification and power sector growth in the U.S., as Trump’s policies push back against this acceleration. Mike stresses the importance of technology improvements in EVs and solar energy, foreseeing a gradual replacement of internal combustion engines. He also signals concerns over tariffs’ economic effects on earnings and consumer costs, predicting that gold might outperform other assets this year.

This interview highlights the complex forces shaping copper markets today: tariffs causing price distortions, divergent economic conditions between the U.S. and China, and the pivotal role of copper in the global shift towards electrification and renewable energy—an evolution that will continue to influence commodity markets and economic outlooks.