The potential reintroduction of 25% tariffs on copper imports from Canada and Mexico by the incoming Trump administration has sparked concerns about the future of the US copper market. This move could have significant implications for the supply chain and end-use demand, particularly in the automotive sector, which is a major consumer of copper. The proposed tariffs could make Canadian and Mexican copper imports less cost-competitive, leading US buyers to seek alternative suppliers and redrawing global copper trade routes.



According to Benchmark Mineral Intelligence, US imports of refined copper in 2023 totaled 767kt, with 128kt coming from Canada and 14kt from Mexico. Together, these two countries accounted for around 16% of the US's total copper imports last year. Chile remains the largest supplier of refined copper to the US, followed by Canada and Peru. The US also exported 33kt of refined copper last year, net of re-exports.

Canada's role in the US copper market extends beyond refined copper. The country exported 207kt of copper and copper alloy semi-finished products to the US in 2023, representing 42% of the total US imports in this category. A significant portion of these imports consisted of copper wire rod, with Canada supplying over 80% of the US's wire rod import requirements over the past decade.

The proposed tariffs could also disrupt existing trade relationships and impact industries reliant on copper, such as the automotive sector. Canada is a major supplier to the US copper market, accounting for 16% of total US imports in 2023. Given copper's widespread use, disruptions to copper supply could have many downstream effects, particularly in the automotive sector, which constitutes the third-largest portion of the more than $900 billion US-Canada yearly bilateral trade.

Moreover, the tariffs could incentivize investment in domestic copper production, though no formal incentives have been proposed to support US manufacturers. While the Inflation Reduction Act demonstrated that domestic industries can grow with the right incentives, the current strategy appears focused on raising costs for imported materials rather than bolstering local production capabilities.

In summary, the proposed tariffs on Canadian and Mexican copper imports could lead to a reshuffling of global copper trade routes, disrupt supply chains, and impact end-use demand, particularly in the automotive sector. However, the timeline and likelihood of these changes remain uncertain, as the incoming Trump administration has tied the sanctions to border security. Investors should closely monitor the situation and consider the potential impacts on their portfolios.

At the time of publication, the author had no positions in any stocks mentioned.