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Copper is one of the best market performers this year, up 27% amid Trump’s tariff concerns and China’s further stimulus measures mapped out last week. Copper futures prices at COMEX rose to as much as $5.15 per pound last Thursday, nearing a record high seen in May 2024. The base metal’s price retreated slightly to $5.12 per pound during Monday’s Asian session.

The industrial metal has become increasingly crucial, with demands surging for electrification in batteries-powered vehicles, artificial intelligence (AI) boom, and the world’s transition to renewable energy.

On the other hand, copper has been in supply constraints due to a lack of mineral investment and reduced refinery capabilities. Against the backdrop of undersupply, Trump’s tariff threats, China’s renewed stimulus measures, and the US dollar’s weakness this year have collectively contributed to the price surge.

“A part of the copper story is China's stimulus and recovery, the other part is tariffs. We could be seeing a boost in demand at a time when higher prices could restrict the supply side. The weaker dollar (naturally) helps a bit as well,” said Kyle Rodda, a senior market analyst at Capital.com.

Trump’s copper import probe shifts shipment to the US

Last month, US President Donald Trump signed an executive order to investigate the nation’s imports of copper to address the threat to national security and economic stability. “The United States faces significant vulnerabilities in the copper supply chain, with increasing reliance on foreign sources for mined, smelted, and refined copper,” stated the White House. The order is considered a precursor to copper’s import duties, competing with China’s dominance in the metal supply chain, which triggered a spike in copper prices.

Copper futures prices jumped about 12% since the announcement as traders were paying higher premiums on speculation that the US would impose tariffs on the base metal imports. Suppliers also rushed shipments to America ahead of potential import duties, reducing volumes elsewhere. Trump’s ambition to bring production back to the US may lead to higher manufacturing costs, in turn, elevating inflation.

China plans to boost domestic consumption

At the government annual meeting, China set its gross domestic product (GDP) growth target at 5% and raised its deficit level to a three-decade high, followed by further stimulus measures to bolster its economy.

Earlier this month, China’s state news agency, Xinhua, reported that the government will “vigorously boost consumption” and “expand domestic demand in all directions.” The plan includes measures to support domestic spending, raise household income, and childcare subsidies.

Furthermore, the country’s retail sales rose 4% in the first two months, the fastest pace since October last year. Additionally, both industrial output and fixed-asset investment grew more than estimates in February.

China is the world’s largest copper supplier and consumer, as well as a key player in driving global green energy transitions. These announcements, alongside positive economic data last week, further added to copper price’s upside momentum, with copper futures price up 4.4% last week, extending a three-week gaining streak.

The US dollar’s weakness lifts metal prices

The US dollar weakened against the other major currencies in the G-10 group since mid-January, with the dollar index down 4% this year. A widening global trade war sparked risk-off sentiment, leading to selloffs in the US stock markets and a decline in the US dollar. In the Federal Open Market Committee (FOMC) meeting last week, the bank expected slower economic growth and higher inflation. A weakened greenback tends to push up commodity prices, as most are priced in the US dollar, although it is the primary reason for copper’s rally.