Traders rushed to stockpile copper before Trump's tariffs. Now they're stuck with a lot of it.

Refined copper was unexpectedly exempted from new US tariffs, causing COMEX copper futures to plummet 20% in their largest intraday drop since 1988. This decision caught traders off guard who had front-run anticipated tariffs by importing significant volumes, resulting in COMEX stockpiles surging 170% to a 21-year high of 253,431 short tons. The resulting inventory overhang is expected to lead to re-exports, potentially pressuring London Metal Exchange prices, despite the White House not ruling out future phased tariffs on refined copper.

Analysis

The unexpected exemption of refined copper from new US tariffs has triggered a significant dislocation in the copper market, driven by the unwinding of speculative positions. The resulting 20% single-day plunge in COMEX futures, the largest since 1988, directly reflects the market being caught off-guard after months of front-running the anticipated policy. This speculative fervor had created a 28% premium for US copper futures over the London Metal Exchange (LME), a spread that has now collapsed. The most critical consequence is the massive inventory overhang in the United States, with COMEX-registered stockpiles surging 170% to a 21-year high of 253,431 short tons. This occurred as LME inventories simultaneously fell by 50%, illustrating the scale of metal diversion. This US-centric surplus is now poised to be re-exported, which, as noted by ING strategists, will likely exert bearish pressure on LME prices as supply flows back into the global market. While the White House has floated the possibility of phased tariffs for 2027 and 2028, this distant and conditional threat is overshadowed by the immediate reality of a supply glut.

Key Decisions for Investors

• Anticipate continued downward pressure on global copper prices as the 21-year high US stockpiles are likely to be re-exported, increasing supply on the London Metal Exchange.
• The collapse of the COMEX premium over the LME signals the abrupt end of the tariff-arbitrage trade, and investors should be wary of further volatility as these large positions are unwound.
• While the near-term outlook is bearish, monitor US trade policy developments leading into the mid-2026 market review, as the potential for future tariffs remains a source of long-term uncertainty.
• This event underscores the high volatility risk in markets driven by policy speculation, highlighting the need for cautious position sizing when trading based on anticipated government actions.