Copper slips on risk-off sentiment

Copper futures fell below $5.60 per pound on Tuesday, snapping a two-day rally as investors trimmed exposure to risk assets ahead of the looming August 1 deadline for U.S. tariffs. Market participants grew increasingly cautious following remarks from U.S. Treasury Secretary Scott Bessent, who reiterated that the upcoming 50% tariffs on copper imports are designed to increase leverage in ongoing trade negotiations.

He also noted that President Donald Trump may consider extending the deadline for countries demonstrating “meaningful progress,” but emphasized that the current policy stance remains firm.

The renewed tariff uncertainty prompted a wave of profit-taking in the copper market, particularly after prices surged to record highs earlier this month in reaction to Trump’s announcement.

The move to impose steep tariffs was framed as part of a broader effort to revitalize domestic manufacturing, reduce dependency on foreign refined copper—particularly from China and Chile—and create a more favorable landscape for U.S.-based producers. However, the policy has also heightened global supply chain concerns, especially among manufacturers in electrical, construction, and renewable energy sectors that rely heavily on imported copper inputs.

The widening divergence between U.S. and global copper markets has added to volatility. The premium between U.S. copper futures and London Metal Exchange (LME) contracts has ballooned to an unprecedented 25%, as traders scrambled to front-load shipments before the tariffs take effect. This dynamic has distorted trade flows and created temporary arbitrage opportunities, but it has also raised questions about the long-term impact on supply availability and pricing consistency.

In addition to tariff-related pressures, copper is facing headwinds from slowing global manufacturing activity. Recent PMI data from both Europe and Asia pointed to subdued demand growth, particularly in sectors such as construction and heavy machinery, which are key consumers of copper.

Meanwhile, Chinese authorities have continued to release strategic copper reserves to stabilize local prices, further weighing on international sentiment.

Looking ahead, traders are closely watching for updates on trade negotiations and potential policy adjustments from major copper exporters. Any signs of easing tensions or exemptions could relieve some upward pressure on U.S. prices, while a hardline stance may deepen the disconnect between domestic and international markets. At the same time, attention remains on broader macroeconomic signals, including upcoming inflation data and central bank commentary, which could influence investor appetite for commodities across the board.