Copper's Rally Amid Trade War Truce Hopes: Can It Last?

The global copper market has been caught in a tug-of-war between geopolitical tensions and long-term structural demand. Recent price gains, however, hint at a fragile optimism as investors speculate about a potential truce in the U.S.-China trade war. But with tariffs still escalating and supply chains strained, can copper’s rebound endure?

The Trade War’s Impact on Copper Prices

The trade conflict between the world’s two largest economies has had a direct and volatile impact on copper, a key indicator of global industrial health. In April 2025, China’s 34% tariffs on U.S. imports triggered a 5.1% collapse in LME copper prices to $8,890 per tonne, while COMEX futures plunged to $4.03 per pound—the lowest since July 2022. The tariffs, part of a broader escalation, reflected fears of reduced demand from both nations, which together account for nearly half of global copper consumption.

By late April, prices stabilized slightly at $4.85/lb, but the damage was done. Major miners like Freeport-McMoRan saw stock declines of 13.8%, while Glencore and Anglo American fell over 10% and 11%, respectively. The pain extended to Canadian firms like Teck Resources, whose shares dropped over 12%, underscoring the sector’s vulnerability to trade disruptions.

Truce Hopes Drive Recent Gains

Despite the turmoil, copper has rallied in recent weeks, with prices inching toward $9,200/tonne on the LME by early May. This rebound reflects market optimism about a potential diplomatic breakthrough. Analysts at Goldman Sachs noted that a trade truce could stabilize prices, citing copper’s 500,000-tonne supply deficit by 2026 driven by EV adoption and renewable energy infrastructure.

The U.S. Treasury Secretary’s acknowledgment that the 145%/125% tariff regime is “unsustainable” has fueled speculation about de-escalation. Meanwhile, behind-the-scenes reports suggest China may quietly exempt certain U.S. goods from retaliatory tariffs—a tactical move to ease tensions without appearing conciliatory.

Analysts Warn of Near-Term Risks

However, the path to a truce remains fraught. Citigroup’s Max Layton cautions that further declines of 8-10% are possible if tariffs persist, with Q2 2025 prices projected to drop to $8,500/tonne. The U.S. auto parts tariffs imposed in May, coupled with de minimis duty hikes to 90% of declared value, are compounding supply chain costs. China’s retaliatory 125% tariffs on U.S. goods—now applied to all shipments under $800—further cloud the outlook.

Long-Term Bullish Fundamentals

Despite near-term volatility, the long-term narrative for copper remains robust. Goldman Sachs highlights that EVs require 3-4x more copper than conventional vehicles, while offshore wind projects consume 5.5 tons of copper per megawatt. By 2030, electrification alone could boost demand by 5 million tonnes annually.

Structural supply constraints amplify the bullish case. 80% of copper reserves are concentrated in politically unstable regions, and new mine projects face permitting delays and environmental hurdles. Low-cost producers (e.g., Chilean and Peruvian mines) may weather the storm, but high-cost operators in Africa and Asia face margin pressure.

Conclusion: Copper’s Rally is Fragile—But the Long Game Favors Bulls

Copper’s recent gains reflect hope, not reality. While a trade truce could provide a near-term boost, the U.S.-China standoff shows no signs of resolution. Citigroup’s $8,500/tonne downside target and the ongoing tariff escalations suggest further turbulence ahead.

Yet the long-term fundamentals are undeniable. With global copper demand expected to grow at 2.5% annually through 2030 and supply-side bottlenecks persisting, the metal remains a critical play on the energy transition. Investors should focus on low-cost producers (e.g., Freeport-McMoRan, Codelco) and geographically diversified portfolios to navigate near-term risks while capitalizing on the structural bull market.

As one trader summarized: “Copper is pricing in peace, but the real battle is over supply. If the trade war ends, great—prices will soar. If not, the deficit will force them higher anyway.”