Trump’s copper tariffs cause price turmoil

On February 25, not long after taking office for the second time, Trump initiated an investigation into copper’s national security implications under Section 232 of the Trade Expansion Act of 1962.

Further details came months later, when the president provided an update on on July 8.

“I believe the tariff on copper, we’re going to make 50 percent,” Trump said during a White House cabinet meeting.

His comments came without an official announcement, although Secretary of Commerce Howard Lutnick said the tariff could take effect by late July or early August. This lack of clarity caused copper prices on the Comex to surge as traders worked to bring the metal into the US ahead of potential levies.

Copper price, January 1, 2025, to August 25, 2025.

Chart via Comex Live.

Ultimately, the Trump administration said on July 30 that copper tariffs would only be applied to unrefined copper, semi-finished and copper-intensive derivatives like pipe fittings, cables, connectors and electrical components.

Refined copper will be phased in at 15 percent in 2027 and 30 percent in 2028.

The move essentially pulled the rug out from prices and caused Comex copper to plummet nearly 25 percent.

Copper tariffs could weigh on other industries

Time isn’t the only factor hindering the expansion of US copper production.

Mining is an energy-intensive business, and as demand for electricity grows, copper smelters may have to compete with other entities, similar to what happened in the steel and aluminum sector in 2019.

An April McKinsey report suggests that US power demand will grow at a CAGR of 3.5 percent, increasing from around 4,000 terawatt hours (TWh) in 2025 to about 5,000 TWh in 2030 and 7,000 TWh by 2040.

The report states that this increased demand could lead to bottlenecks as providers are faced with supply chain issues and shortages of dispatchable power as new projects face delays due to labor shortages and multi-year lead times for necessary equipment. It also notes that retail electricity bills have increased 6 percent per year since 2020.

The alternative for the copper sector would be to incur further capital costs by investing in off-grid capacity — this might also be affected by tariffs, as has been seen with photovoltaic imports.

The Reuters report evaluating steel and aluminum tariffs notes that the fees were ultimately lifted in 2019 due to the high cost of electricity and limited demand. The downstream effects meant that the manufacturing, construction and transportation industries faced higher costs, reducing growth in those sectors.

Likewise, a small uptick of about 8,000 jobs in the steel and aluminum sectors was outweighed by losses in other industries as companies sought to offset higher costs through efficiency gains.

One study concluded that the tariffs resulted in the loss of 75,000 manufacturing jobs.

Although the bulk of copper tariffs will be phased in starting in 2027 and 2028, that may not provide enough lead time to build new operations and ensure they have the inputs they need to carry out business.

If applied incorrectly, tariffs could have significant consequences for industries that rely on the red metal, including tech and construction, while also impacting overall economic growth.

“Tariffs will increase the cost to US importers and consumers of copper and related products, and will put downside pressure on potential growth,” Saidel-Baker said.

What should investors know about copper tariffs?

For investors interested in copper, the long-term picture is key.

Although Trump’s scaled-back tariff announcement caused a price pullback, demand for copper is expected to significantly outweigh supply in the coming years, with experts calling for consumption from the tech industry and energy transition to add to growing requirements from urbanization in the Global South.

Whether tariffs will provide a competitive advantage for copper companies already producing and serving the US market remains to be see, but some market watchers see potential for that to happen.

For example, Morgan Stanley (NYSE:MS) upgraded its price target for Freeport-McMoRan (NYSE:FCX) to US$48 on August 11. In its reasoning, Morgan Stanley said that the market is not currently appreciating the benefits Freeport will gain from the tariffs, also noting that it will be able to raise pricing for 2026 copper rod contracts, a semi-finished product, which accounts for the majority of the company’s North American sales volume.

Robert Friedland, founder and co-chair of Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF), has come out in support of the tariffs, suggesting that they will help to rebuild the US copper industry. His reasoning is based on the national security issues inherent to having a single country dominate nearly 50 percent of the market of such a critical mineral.

Tariffs apply a new layer of uncertainty to an already challenging copper supply scenario. If tariffs are phased in gradually and industry is given the proper amount of time and investment, it could lead to a resurgence in US copper production and be a boon for those projects already in development; if not, then it could be a replay of 2018.

A policy break with the past

Canada has long lagged behind its NATO peers in terms of defense spending. According to a May report published by CIBC, Canada allocated only 1.4 percent of its GDP to defense in 2024.

Carney’s new commitments, which allocate 3.5 percent for core military spending and 1.5 percent for broader security investments like critical infrastructure, mark a stark contrast. The 2025/2026 plan from Department of National Defense and the Canadian Armed Forces underscores how this funding will be deployed, outlining a heightened focus on the Arctic and modernization of the North American Aerospace Defense Command (NORAD).

The plan also prioritizes safeguarding Canada’s defense assets, enhancing allied interoperability and integrating advanced technologies like artificial intelligence, nuclear deterrence and drones into training.

To address vulnerabilities such as transportation and manufacturing disruptions, Ottawa will develop a Defense Industrial Strategy aimed at securing timely access to key capabilities while reinforcing the domestic industrial base.

Ottawa is also planning a standalone Canadian Defense Procurement Agency, overseen by Stephen Fuhr, secretary of state for defense procurement, to deliver on these commitments.

For domestic contractors frustrated by bureaucracy and delays, these developments could be a game changer.

Economic impact of defense spending

The RBC and CIBC reports both indicate that defense spending has a positive economic multiplier.

RBC analysts suggest that new Canadian spending commitments that prioritize major equipment purchases could change the breakdown of the nation’s defense budget, which typically allocates 50 percent to personnel, 25 percent to operations, 20 percent to capital and 5 percent to infrastructure. As per NATO’s guidelines for members, at least 20 percent of countries’ defense spending must go toward new equipment purchases.

For its part, CIBC suggests the benefits could be “larger than perceived,” with “multiple short-and long-term positive spinoffs,” including job creation, refuting the idea that defense spending “crowds out” other economic activity.

CIBC highlights defense-related research and development (R&D) as the most powerful driver of long-term economic growth in its reports, with the potential to double the economic benefit of initial spending.

Mehrdad Hariri of the Canadian Science Policy Center has also made a case for R&D spending, arguing for at least a 20 percent allocation of the defense budget, citing dual-use technologies as a catalyst for growing the broader economy.

Dual-use capabilities can also be a bridge for investors with ESG or pension constraints that avoid pure defense stocks.

Canadian defense subsectors to watch

RBC’s report identifies key sectors to watch in Canada’s defense market. Air, land and marine systems are listed as the country’s “core domains” of defense production, supported by strong manufacturing bases in Ontario and Québec for things like combat vehicles, aircraft fabrication, naval shipbuilding and maintenance.

Carney’s pledge to prioritize domestic suppliers is a clear signal to the Canadian defense industrial base, with industry observers linking strategic priorities to concrete market opportunities. As the Globe and Mail’s Pippa Norma has reported, Ottawa’s spending surge is set to help position homegrown players like CAE (TSX:CAE,NYSE:CAE), Calian Group (TSX:CGY), Bombardier (TSX:BBD.A,TSX:BBD.B) and Seaspan to capture new contracts.

In the shipbuilding sector, Ontario’s C$215 million initiative aims to revitalize the province’s warship industry by boosting its shipbuilding capacity for the National Shipbuilding Strategy, an industry dormant since WWII.

Ontario Premier Doug Ford and Vic Fedeli, the province’s minister of economic development, job creation and trade, recently met with senior executives of Algoma Steel Group (TSX:ASTL,NASDAQ:ASTL) to discuss the company supplying steel for the defense industry, potentially securing multibillion-dollar contracts for Canadian navy corvettes designed by Italy’s Fincantieri (BIT:FCT), one of the world’s leading shipbuilders.

“We let them know that if they try to pivot…we would be there to help them,” Fedeli told the Globe and Mail.

Another Canadian firm, Davie Shipbuilding, plans to leverage its recent acquisition of two Texas shipyards to develop local shipbuilding capacity to secure a contract to build icebreakers for the US.

The federal government is also actively pursuing partnerships. The EU defense pact, which Canada signed in June, opens a new market beyond the established US-integrated supply chains. As a recent example, Canadian armored-vehicle maker Roshel has partnered with Swedish steel producer Swebor to manufacture ballistic-grade steel in Canada.

“This project goes beyond steel — it is about establishing industrial sovereignty. By bringing ballistic steel production to Canada, we are reducing a critical dependency, protecting our supply chain, and laying the groundwork for long-term resilience in the defense and manufacturing sectors,’ said Roshel CEO Roman Shimonov in a press release.

This news comes as Canada reviews the purchase of 88 F-35 Lightning fighter jets from US defense contractor Lockheed Martin (NYSE:LMT). Carney ordered the review in March, saying Canada is overreliant on the US defense industry.

While no final decision has been made, the most likely alternative to the F-35 would be the Saab Gripen, a Swedish-made fighter jet. Mélanie Joly, Canada’s minister of innovation, science and industry, visited Saab facilities during a mid-August trip to Sweden and Finland to discuss industrial defense ties between Europe and Canada, but said it was a “normal” part of her job and that she will also meet with US executives from Lockheed Martin.

Risks and realities

While the investment potential of Canada’s defense sector is clear, execution challenges remain. Coverage from the Globe and Mail’s Norma highlights that sentiment among executives is both wary and optimistic.

Canada’s procurement system has a long history of delays and cost overruns, and scaling up production capacity, especially outside US-integrated supply chains, will take time.

Smaller firms warn that slow procurement cycles can threaten their survival, while larger players see clear opportunities in space systems, advanced training and construction for aircraft and naval vessels.

However, RBC analysts warn that funding via higher taxes or debt could dilute the economic benefit, particularly if spending displaces other high-multiplier programs.

Investor takeaway

The ‘Buy Canadian’ directive could offer a rare moment for investors to position themselves early in a sector poised to be reshaped by unprecedented spending and technological advancement.

The sheer scale of the commitment signals a transformative period.

If effectively implemented, Carney’s plan could ignite a multi-decade boom in Canada’s defense sector, expanding opportunities well beyond traditional defense stocks and into aerospace, cybersecurity and dual-use technologies.

However, as Michael M. Smith, COO at Canadian venture capital firm ONE9, wrote for the Windsor Star:

“A new mandate alone will not transform the system if those executing it remain tethered to the same institutional caution. True reform will require individuals willing to challenge orthodoxy even when it carries political cost, those who will reject legacy processes and bloated vendor ecosystems in favour of speed, survivability, and sovereign capability.”

While the pathway may present hurdles, the foundational policy and capital are in place for a dynamic new era in Canadian defense.

Germany agreement

Natural Resources Minister Tim Hodgson signed the minerals agreement with his German counterpart in Berlin.

While not legally binding, the deal outlines plans to coordinate investment and appoint envoys to deepen cooperation in sectors ranging from electric vehicles to aerospace and defence.

“So there is a lot happening,” Carney added. “The number one focus of this government is to build that infrastructure, and particularly infrastructure that helps us deepen our partnership with our European partners, and particularly Germany.”

Germany is Canada’s largest European trading partner, with bilateral trade in goods reaching US$30.5 billion last year. For Berlin, diversifying supplies of energy and industrial inputs remains a priority after the country cut reliance on Russian natural gas following Moscow’s invasion of Ukraine.

Ottawa and Berlin have previously signed memorandums of understanding on hydrogen and critical minerals, including 2022 agreements with Volkswagen (OTC Pink:VLKAF,FWB:VOW) and Mercedes-Benz Group (OTC Pink:MBGAF,ETR:MBG) to secure supplies of nickel, cobalt and lithium for electric vehicle batteries.

Canada’s economy has long depended on the US market, and the intensifying trade dispute with Washington has accelerated Ottawa’s drive to find new outlets.

The Prime Minister has framed Europe as Canada’s most reliable alternative, calling the country “the most European of non-European nations.”

His current trip marks his fourth visit to the continent since taking office in March, with stops in Ukraine, Poland, Germany and Latvia.

For Churchill, a new port would be a welcome transformation.

The northern Manitoba town’s existing facilities have largely been used for grain exports. Expanding its capacity to handle liquefied natural gas and minerals could give Canada another strategic outlet to Atlantic markets, bypassing congested southern corridors and reducing dependence on US ports.

US adds minerals to list

While Canada seeks to deepen European ties, Washington is reinforcing its own approach.

On Monday (August 25), the US Department of the Interior released a draft 2025 list of 54 critical minerals deemed vital to the economy and national security.

For the first time, copper, silver and potash were included, alongside silicon, rhenium and lead.

“President Trump has made clear that strengthening America’s economic and national security means securing the resources that fuel our way of life,” Interior Secretary Doug Burgum said in a recent press release.

“This draft list of critical minerals provides a clear, science-based roadmap to reduce our dependence on foreign adversaries, expand domestic production and unleash American innovation.”

The list, updated every three years under the Energy Act of 2020, guides federal investment, permitting, and recycling strategies. It originated with a 2017 executive order that directed agencies to assess US vulnerabilities in mineral supply chains.

The US Geological Survey tested more than 1,200 disruption scenarios for 84 minerals across 402 industries. The analysis flagged rare earths such as dysprosium, terbium and lutetium among the commodities posing the highest potential risks.