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Informist, Thursday, Apr. 3, 2025

 

By Ashutosh Pati

 

MUMBAI – Metal prices plunged on Thursday as the announcement of reciprocal tariffs by US President Donald Trump weighed heavily on the market. Analysts expect prices of copper and aluminium could correct around 4-5% in the near term.

 

Trump announced reciprocal tariffs against more than 60 countries and territories, sparking fear of a recession in the US and a global economic slowdown. Some of the US' top trading partners such as China, the European Union and Vietnam, have been hit the hardest with substantially higher tariffs. Trump slapped a 34% tariff on China, 46% on Vietnam, and 32% on Taiwan. The new reciprocal rate on China adds to the existing tariffs totalling 20%, bringing the tariff rate on Beijing to 54%.

 

Market participants expect the reciprocal tariffs to ignite retaliatory measures from the affected countries and lead to a potential global trade war. "... tariffs could raise inflation, and if that happens there will be a pause in the interest rate cuts by banks such as the ECB, BOE, or the US Fed. Fears about recession have also risen, which is causing prices to fall," said Ajay Kedia, director at Kedia Advisory.

 

"The 54% levy on China increases complications in trade. Looking at this, base metal prices have fallen, and another 4-5% correction is expected," Kedia said.

 

At 1952 IST, the three-month copper contract on the London Metal Exchange was at $9383.5 per tonne, down 3.3% from the previous close, and the three-month aluminium contract was at $2,454.5 per tonne, down 1.5% from Wednesday's close. On the domestic exchange, the most-active April copper contract was at INR 870.30 per kg, down 2.3% from the previous close and the most-active April aluminium contract was at INR 238.95 per kg, down 1.3%.

 

"The selloff was driven by fears that sweeping US tariffs, announced by Trump, could stall global growth and weaken industrial metal demand," analysts at Kotak Securities said in a report.

 

Although copper has been exempted from the tariffs, the ongoing investigation in the US around copper imports suggests that tariffs on the metal could be announced in the near future. Trump last month ordered the US Commerce Department to investigate the threat that copper imports pose to national security and suggest ways to mitigate any such threat. The mitigation efforts include "potential tariffs, export controls, or incentives to increase domestic production," the order said.

 

Copper prices had rallied in the last few weeks, touching the psychologically significant level of $10,000 per tonne on LME on Mar. 25. Trump's probe into copper imports prompted companies in the US to rush and secure copper, leaving the rest of the world short on the red metal. "Traders have been desperately sourcing metal in the US ahead of any levy. This has sucked inventories out of the international market at a time when demand has been picking up," Daniel Hynes, senior commodity strategist at ANZ Research said in a note.

 

"The markets will remain stagnant for the time being unless there is some cool-off in the tariffs," Kedia said.  End

 

US$1 = INR 85.43

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

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