Industrial Metals Tumble on Trade War Concerns

Following President Trump's imposition of tariffs on China, Canada, and Mexico, industrial metals including copper and iron ore have experienced significant declines. These tariffs have sparked fears of a trade war that could hinder global economic growth.

Key Metals Impacted

* Copper: Fell by 1.5% on the London Metal Exchange (LME) before recovering some losses.
* Iron Ore: Dropped by 3.5% in Singapore, with Chinese markets closed for Lunar New Year holidays.

Tariffs and Currency Impact

The 10% tariff on Chinese imports and 25% tariffs on goods from Canada and Mexico will come into effect on Tuesday. The rising value of the US dollar has also contributed to the decline in metal prices, as it makes them more expensive for most buyers.

Aluminum Disruption

Analysts predict that aluminum will be the most affected commodity, as Canada accounts for 69% of US imports. The new tariffs are likely to disrupt supply chains and drive up US aluminum premiums.

Global Impact

A global trade war could lead to inflation, higher interest rates, and reduced demand for metals. It could also prompt nations to restrict exports of critical minerals.

China's Response and Stimulus

China, the world's largest consumer of metals, is attempting to revive its economic growth. The proposed tariffs will likely compel China to implement additional stimulus measures.

Demand Outlook

ANZ Group Holdings analysts anticipate that while the energy transition and European economic recovery will support metal demand, Trump's tariffs will limit growth due to subdued business confidence.

Market Movement

As of 10:08 a.m. in London, copper was trading at $8,970.50 on the LME, down 0.9%. Aluminum and iron ore also declined.

Impact Factors

The impact of tariffs on commodity prices hinges on the economic impact on China and emerging markets. However, increased tariffs on imported steel are expected to support domestic prices in the US, providing a potential market benefit.