Copper’s Resurgence: Navigating US-China Trade Crossroads Amid Rising Prices

London copper prices have climbed to a three-week high of $9,504 per ton as hopes for U.S.-China trade de-escalation reignite investor optimism. Yet beneath this upward momentum lies a fragile equilibrium, where geopolitical tensions, supply chain disruptions, and long-term demand for green energy infrastructure continue to shape the metal’s trajectory.

The recent price surge, driven by Treasury Secretary Scott Bessent’s remarks that tariff wars are “unsustainable,” has sent markets scrambling to reassess risks. Bessent’s April 2025 comments—suggesting a “near-future” de-escalation—sparked a 2.5% jump in the S&P 500, signaling broader investor relief. However, the path forward remains fraught with uncertainty, as President Donald Trump’s ambiguous stance (“tariffs will come down substantially but not to zero”) clouds the timeline for meaningful resolution.

The metal’s April journey underscores this volatility. Prices peaked at $9,206 in early April on hopes of U.S. tariff exemptions for electronics and Chinese stimulus, only to plunge 7.7% by mid-month as fears of prolonged trade conflict took hold. Recent stabilization near $9,500 reflects a cautious market betting on diplomacy over escalation.

Trade Tensions: A Double-Edged Sword

The U.S.-China tariff war directly distorts copper markets. Since April 2025, U.S. tariffs on Chinese goods have hit 145%, prompting Beijing to retaliate with 125% tariffs on U.S. imports. The fallout has rerouted global supply chains: LME inventories swelled to 265,025 tons as buyers stockpiled pre-tariff metal, while Chinese domestic stocks dwindled amid stalled demand. Regional price divergences have emerged, with Shanghai Futures Exchange (SHFE) prices trading at a $120-per-ton discount to LME benchmarks, reflecting liquidity imbalances.

Supply chain bottlenecks also loom. Canceled warrants—a measure of physical withdrawals from LME warehouses—now account for 35% of total inventories, signaling tightness in deliverable stocks. Chile, the world’s largest copper producer, has slashed its price forecast to $7,500 per ton due to weakening demand, while Goldman Sachs warns of a $6,600 floor in a recession scenario.

The Long Game: Copper’s Green Future

Amid near-term turbulence, the metal’s long-term prospects remain bright. Renewable energy and electric vehicle (EV) adoption—requiring four to six times more copper than traditional energy systems—could add 15 million metric tons annually by 2030, a volume matching China’s current annual consumption.

This demand pivot is already reshaping investments. Freeport-McMoRan (FCX), a major U.S. copper producer, has seen its stock correlate closely with LME price swings, rising 12% since Bessent’s remarks. However, U.S. manufacturers face headwinds: tariffs on Chinese copper have boosted production costs by 3–5%, while delayed Chinese stimulus leaves factories in Jiangsu and Guangdong provinces idle.

Risks on the Horizon

Despite optimism, risks abound. JPMorgan analysts estimate a 90% probability of a 2025 U.S. recession if current tariff policies persist, citing inflationary pressures and Fed rate hikes. Federal Reserve Chair Jerome Powell’s reluctance to cut rates quickly—a point of public friction with Trump—adds to uncertainty.

Geopolitical volatility also persists. While Bessent and White House officials signal de-escalation, Trump’s insistence on maintaining a baseline 10% tariff and his refusal to confirm direct talks with China’s Xi Jinping leave markets guessing. As one trader noted, “We’re pricing in the next shoe to drop, but the long-term story is still there. It’s just a question of who blinks first on trade.”

Conclusion: Copper’s Balancing Act

London copper’s climb to $9,500 marks a fragile victory for de-escalation optimists, but investors must weigh this against lingering risks. Near-term prices hinge on U.S.-China tariff decisions, stimulus timing, and supply chain resilience. Long-term demand from renewables and EVs, however, provides a compelling anchor—15 million tons of annual demand by 2030 could push prices toward Citigroup’s $9,500 year-end target.

Yet the path to that target is fraught. Elevated canceled warrants, widening regional price spreads, and a 90% recession probability underscore the precarious balance between diplomacy and disruption. For now, copper remains a barometer of both geopolitical will and the world’s transition to green energy—a duality investors must navigate with caution.