Loadstar leader: copper tariffs will put the cart before the horse...

© Tetyana Lyapi |

“There seem to be an awful lot of carts, unhelpfully positioned in front of an awful lot of horses…”

President Trump’s tariff campaign may have started as a means to bring manufacturing “back home”, but certain tariff threats make it appear as if it is a tool for personal vendettas (“hey Brazil, stop picking on my mate Bolsonaro”), while others would put US manufacturers at a greater disadvantage than they already are.

Even through the skewed Trumpian concept of tariff benefits, what possible good can come from applying a 50% tariff on copper imports? The metal remains a key component of advanced manufacturing sectors – electric vehicles, miliary equipment and of course, semiconductors – where it could make sense to re-shore to the US.

The only effect of an overnight 50% hike in the cost of key input will be to make manufacturers less certain about locating in the US.

According to the US Geological Survey, the US produces around 1m tonnes of the 2m tonnes its manufacturers use annually. The vast remainder is imported from Chile and Peru, and while it is true that China dominates copper refining, most of these volumes are used by its manufacturers.

The point is what firm would seriously consider reshoring to the US when the uncertainty over input costs is equal to, if not greater than, the uncertainty posed by tariffs, especially given the long lead time and high capex that reshoring requires?

We assume the logic behind copper tariffs is to encourage mining of the metal in the US itself – it could be done, particularly in Arizona, which already produces 70% of US copper volumes and can be expanded. But it would also need investment in smelters and more refining capacity.

If those were in place – if the horse was gently positioned to stand in front of the cart – perhaps it would all make a bit more sense.