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Investing.com - Goldman Sachs has raised its estimate for the baseline U.S. tariff rate on copper to 50% after President Donald Trump said this levy rate would soon be applied to imports of the metal.
Speaking at a cabinet meeting on Tuesday, Trump said the U.S. would impose the duties on copper, a crucial metal used in everything from vehicle manufacturing to military hardware and electric grid infrastructure.
Writing in a note to clients on Wednesday, analysts at Goldman Sachs said the 50% figure was double Wall Street’s consensus expectations. U.S. COMEX copper futures spiked following Trump’s comments to touch an all-time high of $13,000 per metric ton, while shares of Freeport-McMoRan (NYSE:FCX) -- the world’s largest copper producer -- rose by more than 2.5%.
Trump’s statements were later reiterated by Commerce Secretary Howard Lutnick, who said that a so-called Section 232 investigation into U.S. imports of the red metal had concluded. The probe was first announced in February and was slated to end in November.
"The idea is to bring copper home, bring copper production home, bring the ability to make copper, which is key to the industrial sector, back home to America," Lutnick said.
He added that implementation of the heightened copper tariff is expected to come by the end of July or early August.
"[T]he short timeline to implementation increases the risk that a 50% tariff could be imposed, and hence we change our baseline to a 50% tariff on U.S. copper imports from 25% previously," the Goldman analysts wrote.
They predicted that the increased risk of the new duty will spark an acceleration in copper shipments into the U.S. in the coming weeks, as exporters look to lock in lower rates and avoid the higher tariffs.
The Goldman strategists maintained their forecast for December London Metal Exchange copper futures of $9,700 a ton, but flagged a "reduced risk that the price rises above $10,000 in the third quarter." LME copper prices fell after Trump’s announcement, sharply widening an arbitrage spread with COMEX prices.