Metals in a Holding Pattern: How Trade Tensions and US Data Shape the Market

The metals market finds itself in a precarious stalemate. As trade tensions between the U.S. and its major trading partners ease slightly, prices for aluminum, copper, and other base metals remain range-bound, caught between geopolitical risks and shifting U.S. economic data. Investors now face a pivotal question: Will softening trade barriers and U.S. Federal Reserve policy stabilize the market, or will lingering uncertainties keep volatility in play?

Trade Tensions: A Temporary Truce, But Risks Remain

The U.S. administration’s April 2025 announcement of reciprocal tariffs initially sent shockwaves through global markets, but ongoing negotiations with 17 trading partners have introduced a degree of stability. Aluminum prices, for instance, have held steady at $2,428/tonne, despite the 25% Section 232 tariffs imposed in March. Meanwhile, copper trades at $9,374/tonne, reflecting balanced expectations for green infrastructure demand and supply chain resilience.

However, the truce is fragile. China’s retaliatory tariffs—125% on U.S. goods—remain in place, while the EU delays its countermeasures until July. The Anti-Stacking Order (April 29, 2025) prohibits overlapping tariffs, but uncertainty lingers for sectors like automotive and maritime equipment. For investors, the key is to monitor tariff exemptions and renegotiations, particularly for critical minerals like lithium and cobalt.

U.S. Economic Data: A Mixed Picture

The U.S. economy’s performance continues to weigh on metals demand. The March 2025 S&P Global Manufacturing PMI dipped to 50.2, barely above contraction territory, as tariff-driven inflation and weak new orders take a toll. Input cost inflation hit a 31-month high, squeezing margins for manufacturers reliant on imported metals.

Yet, not all sectors are suffering. Technology equipment investment—a key driver of semiconductor and copper demand—is projected to strengthen, buoyed by AI spending. This contrasts sharply with construction machinery, which faces negative growth, as higher input costs delay projects.

Sector-Specific Opportunities and Risks

1. Precious Metals: Gold’s rise to $3,337/oz reflects its safe-haven appeal in a volatile environment. With the U.S. dollar down 4.2% year-to-date and core inflation cooling to 2.9%, real rates are near zero—a bullish sign for gold.
2. Critical Minerals: Uranium stands out as a standout performer. Australian producer Boss Energy achieved 295,819 pounds of output in Q2 (up 116% year-on-year), capitalizing on global nuclear expansion. The ASX300 Metals & Mining Index hovers near its 200-day moving average (6,230), signaling a potential cyclical rebound.
3. Base Metals: Aluminum and copper face a dual challenge: tariff-driven premiums (12–18% above 2024 averages) and weak demand in transportation and construction. Investors should prioritize firms with geopolitical diversification, such as those with operations in Australia or Canada.

Investment Implications: Play Defense, Seek Resilience

The market’s bifurcation demands a nuanced approach:
- Short-Term: Focus on precious metals and critical minerals, which offer inflation hedging and long-term demand tailwinds.
- Long-Term: Look to companies with supply chain flexibility, such as Boss Energy or firms investing in U.S.-aligned mining projects.
- Avoid: Overexposure to sectors tied to construction and transportation equipment, which face headwinds from the 1.2% U.S. GDP growth forecast and tariff-driven cost pressures.

Conclusion: The Range-Bound Reality

Metals remain in a holding pattern, with prices anchored by tariff-driven premiums and geopolitical risks. The 1.2% U.S. GDP growth forecast underscores the economy’s fragility, while $100–$200/item tariffs on Chinese postal goods highlight the embedded costs of trade friction. Investors must balance near-term defensive plays (gold, uranium) with long-term bets on critical minerals.

The market’s fate hinges on two key variables:
1. Trade negotiations: A resolution with China or the EU by July could unlock downward price pressure, while further escalation would sustain premiums.
2. Fed policy: With rates held at 4.25%–4.50%, a delayed rate cut until late 2025 leaves little room for error.

For now, the metals market is a waiting game—one where patience and diversification are the best strategies.

Disclaimer: This analysis is based on reported data and may not account for all variables or subsequent developments.