While the administration has portrayed the move as a response to China's increasing control over global copper production, the countries likely to be most affected will be Chile, Canada and Mexico, the major suppliers of refined copper and copper-related products to the United States.

US head of state Donald Trump has ordered his country's government to explore possible tariffs on copper imports, marking another significant step in his administration's ongoing trade strategy.

The executive order, signed Tuesday (Feb. 25), instructs the Commerce Department to investigate whether imported copper poses a national security risk under Section 232 of the Trade Expansion Act of 1962. The decision has already provoked a strong reaction in the global copper market, widening price differentials for the red metal and prompting traders to begin rushing shipments to the United States.

According to the Globe and Mail , White House trade advisor Peter Navarro said the move is designed to curb the expansion of China's copper sector while addressing vulnerabilities in the U.S. supply chain. He emphasized the need to restore copper mining, smelting and refining in the country, citing military and technological applications.

Despite Trump's prolonged push to balance the trade balance, the United States currently has a surplus in copper trade. In 2024, the country exported copper worth $11.3 billion and imported $9.6 billion, according to Census Bureau data.

U.S. officials argue that changes in supply and demand forecasts create a national security risk.

Trump has widely resorted to tariffs as part of his trade policies, and previously eliminated exemptions from the 2018 tariffs on steel and aluminum. More recently, he has threatened neighboring countries (Canada and Mexico) with 25 percent tariffs on all imports. These could go into effect next week , although plans have changed several times.

The president has also promised broader tariffs to match rates imposed by other nations, and has targeted industries such as automotive, semiconductors and pharmaceuticals.

Traders seek copper arbitrage opportunities

The announcement of possible copper tariffs has sent U.S. copper prices soaring, leading to an arbitrage opportunity that traders were quick to seize. Metal prices on the Comex exchange in New York rose as much as 4.9 percent, with copper trading more than $1,000 above the benchmark London Metal Exchange (LME) index.

Earlier this month, copper contracts on Comex reached a $1,300 premium over LME prices before falling to $600 and then rising again following Trump's announcement. The copper investigation could take months to complete, giving traders more time to move the metal to the U.S. without sanctions.

According to industry sources, in recent weeks major companies, including Glencore (LSE:GLEN,OTC Pink:GLCNF) and Trafigura Group, have begun shipping copper to the U.S. market. While most of their shipments come from South America, there have also been inquiries about shipping copper from Asian warehouses tracked by the LME.

Potential tariffs are also changing global copper flows: requests to withdraw copper from LME warehouses in Asia rose by more than 93,000 metric tons in recent days, marking the largest four-day decline since 2013.

The shift is redirecting metal that normally flows to China, the world's largest copper consumer, to the U.S. market.

Rising U.S. copper prices are also driving up costs for domestic manufacturers, which have paid an average premium of 8 percent over global prices since Trump first floated the idea of imposing copper tariffs in late January.

One challenge for copper importers is that only a limited number of producers are approved for Comex deliveries, and Chinese smelters are notably absent from the list. In addition, Trump's current 10 percent tariff on Chinese goods , implemented earlier this month, has deterred some companies from targeting the U.S. market.

As global copper markets brace for uncertainty, companies with U.S. assets are looking to capitalize on government efforts to shore up domestic supply. Among them is American Pacific Mining (CSE:USGD,OTCQX:USGDF) , which believes its two U.S.-based copper projects could play a role in Trump's copper ambitions.

"Current market dynamics and U.S. policy trends underscore the strategic value of our U.S.-based copper assets. With projects such as our Madison Copper-Gold project in Montana and the Palmer Copper-Zinc project in Alaska, we are well positioned to potentially supply growing domestic demand for copper, a critical metal for the U.S. economy and the transition to clean energy," said Warwick Smith, chief executive officer of American Pacific, in a statement.

Giann Liguid, Investment News Network