Copper's Resilience Amid Tariff Uncertainty: A Delicate Balance of Policy and Markets

In early April 2025, Citigroup (Citi) issued a revised outlook for copper prices, signaling a slower decline than previously anticipated as U.S. tariff policies pivoted. While global trade tensions remain a headwind, short-term factors such as strategic Chinese buying, supply constraints, and tariff exemptions have created a precarious equilibrium in the market. This article dissects Citi’s forecasts, U.S. tariff developments, and the forces shaping copper’s trajectory.

Tariff Dynamics: Easing Pressures, Lingering Risks

The U.S. tariff landscape for copper in April 2025 was marked by contradictions. While President Trump’s Section 232 investigation into copper imports (threatening a 25% tariff) remained unresolved, the metal was explicitly excluded from the broader 10% baseline reciprocal tariffs imposed on April 5. This exemption, part of Annex II of the executive orders, shielded copper from immediate disruptions. However, the Commerce Department’s pending report (due November 22, 2025) leaves the threat of tariffs unresolved, maintaining a cloud over long-term pricing.

Citi’s Revised Forecasts: Short-Term Stability, Medium-Term Caution

On April 8, Citi raised its three-month copper price forecast to $8,800/tonne, reversing an earlier cut to $8,000/tonne. The revision reflected three key dynamics:
1. Tariff Easing: U.S. policy shifts alleviated fears of immediate supply chain disruptions.
2. Chinese Buying: Beijing’s opportunistic purchases during dips provided temporary support.
3. Scrap Supply Tightness: U.S. stockpiling efforts constrained scrap availability, limiting oversupply risks.

Citi also projected an average Q2 2025 price of $9,000/tonne, up from its April 7 forecast. However, the bank maintained a bearish stance for 3–6 months, citing slowing demand due to the 145% U.S. tariffs on Chinese exports and broader stagflation concerns. Analysts like Citigroup’s Max Layton warned of a potential historic correction, with prices dipping as low as $6,600/tonne if trade conflicts escalate.

Market Volatility: The Role of Speculation and Policy Uncertainty

The market’s reaction to tariff news has been erratic. Copper prices surged to a record $5.28/lb in late March amid fears of Section 232 tariffs but plummeted 16% to $4.40/lb by mid-April after exemptions were clarified. This volatility underscores traders’ reliance on policy signals.

Citi noted that pre-buying ahead of tariffs had initially driven premiums to $500/ton, but delayed implementations and retaliatory measures (e.g., China’s 34% tariffs on U.S. goods) led to a glut. By April 16, LME copper hovered around $3.98/lb, reflecting a tug-of-war between short-term stability and long-term demand fears.

Structural Challenges: Supply, Demand, and Geopolitics

Long-term risks remain anchored in structural issues:
- Supply Constraints: Chile’s Cochilco revised its 2025 forecast to $8,580–8,800/tonne, citing recession risks and a potential oversupply from U.S. stockpiling delays.
- Demand Headwinds: U.S.-China trade wars are stifling manufacturing activity. China’s copper imports fell 12% year-on-year in Q1 2025, signaling weakening industrial demand.
- Policy Uncertainty: The unresolved Section 232 investigation and potential Fed rate hikes add layers of unpredictability.

Investment Implications: Navigating the Copper Crossroads

Citi advises investors to remain cautious. Key takeaways:
- Short-Term Plays: Exploit rallies near $9,000/tonne as “selling opportunities,” given overbought conditions.
- Medium-Term Risks: Await policy clarity—tariff reversals, Fed interventions, or Chinese stimulus (“policy puts”)—before accumulating positions.
- Alternatives: Consider U.S. natural gas or gold as safer havens amid macroeconomic uncertainty.

Conclusion: Copper’s Precarious Equilibrium

Copper’s near-term resilience stems from tariff exemptions, strategic buying, and supply bottlenecks, but the metal remains hostage to geopolitical and macroeconomic forces. Citi’s forecast of $9,000/tonne average for Q2 reflects this duality: short-term stability amid longer-term risks. With the Section 232 report due in November and trade tensions unresolved, investors must tread carefully.

The data paints a clear picture:
- $8,800/tonne (Citi’s revised short-term forecast) vs. $6,600/tonne (worst-case downside).
- 145% U.S. tariffs on Chinese goods vs. $340 billion in global copper market value.

In this environment, copper is less an investment and more a barometer of global economic health. Until policy risks subside, traders would be wise to prioritize caution over optimism.