By Goldman Sachs stated in a client note on Monday that the copper market is currently pricing in a 50% probability of a 10% US tariff on the red metal by the end of the first quarter, according to a Reuters report.
Their analysts’ subjective probability of a 10% effective tariff on copper by year-end is also 50%.
At the time of writing, the three-month copper contract on the London Metal Exchange was at $9,183 per ton, down 0.1% from the previous close.
Last week, the copper contract on LME had touched a one-month high.
Trump’s trade policies and copper
US President-elect Donald Trump is scheduled to return to the White House later today to deliver his inauguration speech.
Traders around the world will be closely analyzing his speech for clues about the policies he intends to implement immediately upon taking office.
During his campaign, Trump had proposed several protectionist trade policies, including tariffs of up to 10% on all imports, 60% on Chinese goods, and a 25% import surcharge on products from Canada and Mexico.
These proposals have raised concerns among economists and business leaders about the potential for a trade war and the negative impact on the global economy.
The inauguration speech will be Trump’s first opportunity as President to outline his economic agenda and provide more details about his plans for trade policy.
Financial markets are likely to react to his speech, with stocks, currencies, and commodities potentially experiencing volatility depending on the tone and content of his remarks.
Investors will be particularly interested in hearing whether Trump intends to follow through on his campaign promises regarding tariffs and trade restrictions.
If he signals a willingness to implement these policies quickly, it could lead to a sell-off in stocks and a strengthening of the US dollar.
On the other hand, if he strikes a more conciliatory tone and emphasizes cooperation with trading partners, it could boost market sentiment and lead to a rally in risk assets.
The inauguration speech will also be closely watched by foreign governments and businesses, who will be eager to gauge the new administration’s approach to international trade and investment.
Trump’s protectionist rhetoric has already strained relations with some of America’s closest allies, and his actions as President could have far-reaching consequences for the global economic order.
Other tariff possibilities
Goldman Sachs also said that the oil market is pricing in almost a 40% probability of a 25% US tariff on Canadian goods, including oil.
This is significantly higher than the bank’s own estimate of a 15% likelihood of a 25% effective tariff being imposed by the end of the year, according to Reuters.
The West Texas Intermediate crude prices were at $77.07 per barrel, down 0.4%. Brent crude was also down 0.4% at $80.45 a barrel.
The likelihood of a 10% effective tariff on gold being implemented in the coming year was assessed at 10% by the investment bank.
It cited bullion’s classification as a financial asset, which likely exempts it from widespread tariffs.
At the time of writing, gold prices on COMEX were around $2,749.06 per ounce, largely unchanged from the previous close.
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