EXCLUSIVE: Copper Slumps; a Reaction to Trump’s Election Victory

Following the US election result announcement, its volatile copper market was quick to react showing a downward trend. Copper prices have fallen as much as 4.08% in the country since the results were announced on November 6.

Earlier, during the week ending on November 8, copper gained a slight strength in anticipation of results with a minimal rise of 0.8%. However, that was a short-lived tale. This week copper has fallen as much as 4% since the previous week.

Copper rod prices were consistently falling in the US market even before the announcement. It has fallen much as 14.3% since the start of 2024. Our industry experts predict the downward trend to continue, especially since Trump could potentially implement a 60% tariff on all Chinese goods.

Notably, China leads in copper imports that account for a large portion of the global copper trade. Given that China consumes over 50% of the world’s copper, a slowdown in Chinese growth would have significant bearish implications for copper prices.

Commodity markets, especially metals are witnessing a significant volatility following Donald Trump's re-election victory. But unlike the explosive copper rally of 2016, this time the metal is largely trading in a risk-off mode, with a sharp focus on broader global economic signals, particularly from China. London Metal Exchange (LME) three-month copper dipped by 4.1% on the day following the election results, likely triggered by the initial surge in the U.S. dollar, a typical reaction to uncertainty following a closely contested election.

The announcement of a $1.4 trillion bond program to help alleviate local government "hidden debt" was seen as a disappointment by market participants, as it failed to meet expectations for more aggressive fiscal measures to stimulate the Chinese economy.

As the world’s largest consumer of copper, China’s economic policies are a critical factor for copper prices. The focus during the election week shifted quickly from U.S. politics to the implications of China’s actions. The NPC Standing Committee’s announcement was seen as positive but insufficient to spark a major shift in economic growth. Copper bulls had hoped for more significant fiscal measures to stimulate domestic demand and mitigate China’s growing economic vulnerabilities, but the outcome fell short of expectations.

The key question for copper is whether the threat of new U.S. tariffs under a second Trump term will push China to take more aggressive steps to support its economy. Traders had hoped that tariff pressures would encourage Beijing to open the stimulus taps further, but the debt restructuring measures unveiled last week did little to buoy market sentiment. While the bond program is seen as a step toward reducing local government debt risks, it does not directly stimulate demand in the way that broader fiscal policies or consumption subsidies would.

Tariffs are unlikely to have an immediate effect on the direct flow of copper from China to the U.S., as many of the duties have already been implemented under the Biden administration, particularly on aluminium and steel. However, broader concerns about the impact of trade tensions on the global economy and the strength of the U.S. dollar remain key drivers of copper’s price action.