Tariff Policy Reversal Causes Copper Prices to Plunge 22% and Trigger Market Turmoil

An overnight policy turnaround threw the global copper market into chaos. On July 31, U.S. President Trump suddenly announced a new tariff plan, initially expected to impose "comprehensive copper tariffs," but it turned out to target only semi-finished products, with the core cathode copper completely exempted. Once the announcement was made, New York copper futures plummeted, setting an unprecedented single-day decline record in the industry.

**The Collapse of Arbitrage Behind the Copper Price Drop**

During that weekend before the policy announcement, the market was filled with optimism. As traders anticipated the tariffs would be fully implemented, global traders rushed to ship copper to the U.S., trying to position themselves before the new policy took effect. The premium of New York copper over the London benchmark soared above $3,000 per ton—this huge arbitrage opportunity attracted billions of dollars in capital inflows.

However, the White House's final decision was like a cold shower. Cathode copper, ore, and concentrates were all granted exemptions, completely destroying the arbitrageurs' plans. According to the latest data, September copper futures in New York fell to $4.3475 per pound (about $9,623 per ton), a cumulative decline of 22%. The previously eye-catching premium also collapsed—dropping 97% from its high point, now only $104.

What does this mean? Carefully planned arbitrage trades over several weeks disintegrated within hours. Copper stocks piled up at U.S. ports overnight, transforming from hot commodities to hot potatoes.

**Policy Compromise in Industry Negotiations**

Market analysts generally believe that this policy shift was not without precedent. U.S. domestic refined copper production cannot meet domestic demand, prompting major copper companies to lobby, ultimately leading the White House to change course. This decision balanced domestic industry protection with global supply chain stability.

After the sharp decline in copper prices, market sentiment quickly adjusted. Some investment institutions pointed out that when copper prices return to around $4.50 per pound, they have already recovered to a reasonable valuation prior to the tariff announcement. From a market perspective, the tariff panic that had been hyped for months has finally settled, and supply chains are no longer facing extreme arbitrage challenges.

**A Sword Hanging Over Head**

But what is truly worth cautioning is that the White House document mentions "suspension" rather than "cancellation." According to the announcement, the Commerce Department must complete an assessment of refined copper tariffs by June 2026, and the President will decide whether to activate a "phased tariff mechanism"—with an estimated 15% rate in 2027, rising to 30% in 2028.

In other words, the Damocles sword still hangs over the global copper supply chain. The tariff ghost has not disappeared; it is only temporarily at rest.

**Implications for Investors**

This overnight surprise profoundly reveals the fragility of the metals market in the face of U.S. policy. Hundreds of billions of dollars can evaporate within hours of a policy announcement, and no hedging or strategies can fully mitigate such risks.

Investors need to understand that tariff negotiations between the two largest global economies, China and the U.S., remain full of uncertainties. Any new policy signals could trigger fierce market volatility. For commodity-focused portfolios, maintaining vigilance and adjusting positions promptly have become essential operational disciplines. The story of copper price plunges reminds all market participants that policy directions often outweigh technical factors in short-term trends and are more difficult to predict.