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The potato price hike is a major factor in the inflationary pain of Russia's poor.
In a farm near Moscow newly arrived Indian guest workers are planting potatoes and kale - work that is closely monitored by analysts from the central bank as they prepare to meet with board members in order to set interest rate. In developed countries such as the United States, food makes up about 14% or less of the basket that is used to calculate the inflation rate. However, in Russia, it can be as high at 40%. The rising prices of potatoes and other staples are a big reason for the tightening monetary policy. Even though the central bank cut its benchmark rate on June 6, it is still at the highest level since 2003. Inflationary expectations, which are a major driver of price pressures, remain high even though actual inflation has slowed down. The potato prices have tripled in the last year, when the crop was down by 12%. "It's crazy. The price of potatoes has always been low. "At this price, I won't buy them. I think very few people will," said Tamara a 67 year old pensioner in front of a Pyaterochka store discount in Moscow. Elvira Nabibullina, the governor of the Central Bank acknowledged the problem at her press conference following the rate reduction. She said, "People don't buy smartphones or televisions on a daily basis." "They buy food." "If prices are rising faster, this can lead to high inflation expectations." A study by Romir showed that Russian households spent 35% of their income on food last month, the highest in five years and a significant increase from 29% in April of 2013. POTATO CRISIS Pyaterochka offers Russian old-crop potatoes at 84 roubles (about $1.06) per kilogram and new-crop potatoes at 120 ($1.53), compared to an average of 43 roubles/kilo last year in retail stores. This is higher than the $0.92 per kilogram charged by Britain's largest supermarket chain Tesco. Prices of onions, cabbages, beets carrots and other ingredients in beetroot, a popular dish throughout Eastern Europe that is often used as a gauge for food inflation, are also up. Even President Vladimir Putin was caught off guard by the crisis. He had been praising Russia's agricultural growth and exports, despite Western sanctions, as a success, despite similar increases in butter and eggs earlier this year. In response, the government increased imports. Egypt tripled its potato supply to Russia while Belarus, Russia’s back-up potato supplier, announced that it was out of stock. STABILIZATION JULY The farmers blame the poor weather for the lower crop, but they also point out that the rising cost of fuel, machinery, fertilizers, and labour as well as the high interest rates are factors. Yaroslav Ilanov, the head of Sovkhoz Sergiyevsky Farm, said: "Last winter, it started out cold and then there was drought." The quality of the potatoes was below average. The potatoes of good quality were sold quickly and the situation started to worsen. He said that the high prices of this year helped compensate for some losses suffered by farmers following a bumper crop in 2023 when retail prices plummeted. The harvest this year is expected to better. Oksana LUT, Agriculture Minister said: "We'll see a drop in prices and a stabilization beginning July." TsMAKP, the think tank that advises the government on inflation, calculated the rate for the poor using basic food, utility and medicine costs, at 20% in April. This is ten percentage points higher than the official rate. TsMAKP stated that "the continued rapid rise in food prices led to a substantial divergence between price index for consumption baskets of low-income population and the overall inflation rates." In April, the average pension for the elderly was $298. Real terms, the pension fell for most of last year and then rose by 1.4% from 2025 onwards. Sergei Aleksashenko is a former central-bank official and an opposition economist who lives in exile in America. He pointed to pensioners and workers in the public sector. ($1 = 78.5000 roubles)
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Gold prices increase as traders watch US-China talks
The gold price rose on Tuesday as traders closely watched developments in the trade talks between China and the U.S. As of 10:15 am EDT (1415 GMT), spot gold rose 0.3%, to $3335.79 per ounce, and U.S. futures gold gained 0.1%, to $3357.50. David Meger is the director of metals at High Ridge Futures. He said that there has been a consolidation of prices in recent weeks. This was largely due to central bank purchases and uncertainty. U.S. commerce secretary Howard Lutnick reported that the talks were progressing well with China as both sides met in London for a second consecutive day, looking to reach a breakthrough over export controls which have threatened another rupture between the superpowers. The talks come after a temporary truce that was established in May, which halted new tariffs for 90 days. Israel sent its navy to strike Iran-backed Houthi target near the Red Sea Port of Hodeidah. It also threatened further action should the group continue its attacks against the Jewish state. China's central banks added gold to their reserves for the seventh consecutive month in May, according to official data released on Saturday. As a safe haven, gold thrives in times of geopolitical or economic uncertainty. Investors also eagerly await the release of U.S. Consumer Price Index on Wednesday, which may provide important insights into future Federal Reserve monetary policy decisions. Spot silver fell 0.8% to $36.42 an ounce. After reaching its highest price since May 2021, platinum fell by 0.4% to $1214.29. Palladium fell by almost 1%, to $1 064.08. Alexander Zumpfe is a precious metals dealer at Heraeus Metals Germany. He said that the rally in platinum was supported by supply concerns, speculation, and an overall uplift within the precious metals sector. Palladium's lagging is due to its smaller demand base and lower investment appeal. Palladium, unlike platinum, lacks a compelling secondary demand story beyond auto catalysts. (Reporting by Sarah Qureshi and Anushree Mukherjee in Bengaluru; Editing by Paul Simao)
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Pakistan increases its defence budget by 20%, but cuts overall spending in 2025-2026
Pakistan will increase its defence spending by 20% following a deadly conflict last month with India, but it will cut overall federal expenditure by 7% for fiscal 2025-2026 to 17.57 trillion Rupees ($62 billion). The budget that was presented by the government of Prime Minister Shehbaz Shariff on Tuesday allocated 2,55 trillion rupees (about $9 billion) for defence from July 2025 to June 2026. This is an increase from the previous 2.12 trillion. The projected deficit was 3.9% of the GDP, compared to the target of 5.9% for 2024-25. The inflation was forecast at 7.5%, and the growth rate at 4.2%. South Asia wants to boost its growth and strengthen its defenses, after the worst fighting it has had with its neighbor in almost three decades. It also wants to meet the requirements of an International Monetary Fund financing programme. In a recent statement, Sharif stated that "after defeating India in conventional warfare, we now have to surpass them in the economic area." Pakistan is also facing the uncertainty caused by new import tariffs imposed by its largest export market, the United States. In April, 26 men were killed by Islamists in an attack against Hindu tourists in Indian Kashmir. Islamabad has denied New Delhi’s claim that militants are backed by Pakistan. The four-day battle featured jets as well as missiles, drones, and artillery. Both India and Pakistan increase military spending The Pakistani allocation of 2,12 trillion rupees (roughly $7.45 billion) to defence in 2024-25 includes $2 billion for equipment, other assets and pensions. India's defense spending for its fiscal year 2025-26, (April-March), was set at 78.7 billion dollars, an increase of 9.5%. This includes pensions, and 21 billion dollars allocated to equipment. It has also indicated that it will increase defence spending. Sharif's Government has projected 4,2% economic growth for 2025-2026. It says it has stabilised the economy which was at risk of defaulting its debts until 2023. The growth rate for this fiscal year will likely be 2.7% compared to the budgeted 3.6%. Pakistan's economic growth is far behind that of the rest of South Asia. South Asian countries are expected to grow by 5.8% on average in 2024 and 6.0% according to the Asian Development Bank. The IMF had requested that the government complete the privatisation process of Pakistan International Airlines. Finance Minister Muhammad Aurangzeb confirmed this. The government has said that a drop in borrowing costs will help boost growth, following a series of interest rate reductions. However, economists warn that the monetary policy may not be sufficient to boost investment. Fiscal constraints and IMF mandated reforms are still holding back investment. Aurangzeb stated on Monday that his goal was to avoid the boom-and-bust cycles of old. He said: "The macroeconomic stability that we have achieved, we want to stay on course." This time, we're very clear about not wanting to waste the opportunity. $1 = 282.0000 Pakistani Rupees (Reporting and writing by Ariba, Saeed, and Asif in Islamabad, Charlotte Greenfield, and editing by Raju, YP Rajesh, and Kevin Liffey).
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World Bank cuts global growth forecast due to trade tensions
The World Bank lowered its forecast of global growth for 2025 on Tuesday by 0.4 percentage points to 2.3%. It said that increased tariffs and uncertainty were a "significant" headwind for almost all economies. The bank's twice-yearly Global Economic Prospects Report shows that it has lowered its predictions for almost 70% of the world's economies, including the United States and China, Europe, and six emerging markets regions. This is a significant drop from its projections six months earlier, before Donald Trump became president. Trump has upended the global trade system with a series on-again-off-again tariff increases that have raised the effective U.S. Tariff rate from under 3% to its highest level in nearly a century. This has triggered retaliation from China and other countries. The World Bank has cut its forecast for growth as a result Trump's unpredictable trade policies. However, U.S. officials claim that the negative effects will be offset by an increase in investment and yet-to-be-approved tax cuts. The bank did not predict a recession but stated that global economic growth in this year will be the weakest since 2008, outside of a major recession. The bank did not predict a recession, but said that global economic growth this year would be its weakest outside of a recession since 2008. The report predicted that global trade growth would be 1.8% by 2025. This is down from 3.4% last year and a third less than the 5.9% in the 2000s. Forecast is based upon tariffs that were in place as of late may, including the 10% U.S. duty on imports. The forecast excludes the increases announced by Trump on April 9 and then delayed until that date to allow for negotiation. Tariff increases and tight labor markets are expected to keep global inflation at 2.9% by 2025. This is still above the pre-COVID level. The bank stated that "risks to the outlook for the global economy remain firmly to the downside." The bank said that its models indicated that an additional 10-percentage-point increase in U.S. average tariffs on top of the already implemented 10% rate, as well as proportional retaliation from other countries, would reduce the outlook by 0.5 percentage points for 2025. The report stated that such an increase in trade barriers could lead to "global trade stifling in the second half this year...accompanied by a widespread decline in confidence, rising uncertainty and turmoil on financial markets." It said that the risk of global recession was lower than 10%. "FOG ON RUNWAY" This week, top officials from China and the United States will meet in London to try and defuse an ongoing trade dispute. The dispute has expanded from tariffs and restrictions on rare earth minerals to include a global supply-chain shock and slower economic growth. "Uncertainty is a drag on the economy, just like fog on an airport runway." In an interview, Ayhan Kose, World Bank's Deputy Chief Economic Officer said that uncertainty slows down investment and clouds future prospects. He said that there are signs of increased trade dialogue, which could help to dispel any uncertainty. And supply chains were adapting, rather than collapsing, to the new global trade map. He said that global trade could grow by 2.4% in 2026, with artificial intelligence developments also boosting growth. He said, "We believe that the uncertainty will eventually decline." Once the fog lifts, trade may resume, but at a more moderate pace. Kose stated that while the situation could worsen, trade continued and China, India, and other countries were still providing robust growth. He said that many countries were discussing new trade agreements which could be profitable in the future. US GROWTH FORECAST CUT SHARPENLY The World Bank stated that the global outlook has "substantially deteriorated" since January. This is mainly because advanced economies are now expected to grow by only 1.2%, down a half-point, after growing 1.7% in 2024. The U.S. outlook has been lowered from 1.4% to 1.4% by a 0.9-percentage point drop, while the outlook for 2026 was reduced by 0.4-percentage points to 1.6%. The report said that rising trade barriers, "record high uncertainty" and an increase in financial market volatility would weigh on private consumption and trade. The growth estimates for the euro zone and Japan were both reduced by 0.3 percent points to 0.7%. The forecast for 2025 predicted that emerging markets and developing countries would grow by 3.8%, compared to the 4.1% growth in January. The report stated that poor countries would be the worst affected. The report said that by 2027, the per capita GDP of developing economies would be 6% lower than pre-pandemic levels. It could take two decades for these countries to recover the economic losses from the 2020s. Mexico's growth forecast was cut by 1.3 points, to 0.2%, in 2025. The country is heavily dependent on U.S. trade. The World Bank has left its China forecast unchanged, at 4.5%. It said Beijing had the monetary and fiscal room to support and stimulate its economy. (Reporting and editing by Andrea Shalal)
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Investors watch US-China trade progress to see if it can bring about a change in the dollar and stock prices
As trade talks between China and the United States continued for a second consecutive day, investors had reason to believe that tensions may be easing between the two world's largest economies. U.S. commerce secretary Howard Lutnick stated that discussions between the two parties were going well. President Donald Trump put a positive spin after the Monday session. Lutnick met with Treasury Secretary Scott Bessent, U.S. trade representative Jamie Greer and their Chinese counterparts at the London International Trade Fair. Markets will likely be relieved if the talks progress, given Trump's frequently changing tariff announcements. These have disrupted supply chain and threatened to stymie global growth. The MSCI All-Country World Index, which reflects world stocks, reached near-record highs. Meanwhile, the dollar was stable against a variety of currencies. "While market participants clearly take a half-full outlook on the outlook, both in terms of trade policy and more generally, we do not think this should be interpreted as an opinion that tariffs are going to be completely unwound," Jonas Goltermann said, deputy chief markets analyst at Capital Economics. Goltermann expects U.S. duty on Chinese goods will settle at around 40 percent, while the majority of analysts say that the 10% universal levy on imported products into the United States will remain. Investors were worried about the new proposals by the Swiss government to require the bank to have $26 billion extra in capital. U.S. Stock futures are trading about 0.1% higher. In Tokyo, Finance Minister Katsunobu Kato announced that policymakers are looking into measures to promote the domestic ownership of Japanese Government Bonds. This comes a day following reports that Japan was considering buying back super-long government bond issued in previous years at low interest rates. The yield for the 10-year JGB remained flat at 1.47%. Meanwhile, 30-year yields increased by 1 bp to 2.92% after a decline from a record high of 3.18 % in late May. The dollar was essentially unchanged for the day at 144.5 yen. Meanwhile, the euro rose 0.1% to $1.1428. After weak UK employment figures, the pound fell 0.3% to $1.35. QUALITY, NOT SIZE Investors' confidence in U.S. assets has been eroded by Trump's unpredictable trade policies, and concerns over Washington's increasing debt. The dollar is down more than 8% so far this year. The deficit will remain stable, and the Americans won't be able to blow up their fiscal situation. Samy Chaar is an economist with Lombard Odier. You'll have macropayoffs if you spend and invest on productive investments. You'll develop an industry, strengthen your economy, create jobs. "If you reduce revenues by cutting taxes on people that don't require the money, then they won't consume more or invest more. So the macropayoff is limited," said he. U.S. Treasuries yielded around 4.45% on Monday, down by 3.4 basis points. The impact of tariffs on the price of goods could be revealed by data on U.S. Consumer Inflation for May, due to be released on Wednesday. The report on the producer price index will be published a day after. Kevin Ford, Convera’s FX and macrostrategist, said that the May CPI and PPI figures in the United States will be closely examined for any signs of inflationary pressures. If core CPI continues to be elevated, rate cuts may not occur at the FOMC meeting on June 18. The traders expect that the Fed will leave rates unchanged during its next policy meeting. By December, only 44 bps of easing had been priced in. Brent crude rose 0.5% to $67.30 a barrel on commodity markets due to optimism that the U.S. China talks scheduled for Tuesday could reduce trade tensions. Gold spot rose 0.4%, to $3341 per ounce.
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Kremlin has said it is ready to deliver bodies of Ukrainian war-dead for "several days"
The Kremlin announced on Tuesday that Russia had been prepared to begin transferring the bodies of Ukraine's dead war soldiers for several days. Trucks containing the initial corpses were parked at the border in refrigerated vehicles, but Kyiv was still working out the details. Both sides agreed on the repatriation of the bodies of soldiers who died in the conflict, during talks held in Istanbul on 2 June. This also led to an agreement for the exchange of prisoners of war. The first day of the conference was Monday The Ukrainian president Volodymyr Zelenskiy accused Moscow of trying to "play some sort of dirty political game and information" in relation to the exchanges. The Russian government has stated that it is willing to receive the remains of any Russian soldiers Kyiv can return. Vladimir Medinsky, a Kremlin adviser, said that on Saturday the Russians had arrived at the exchange point with 1,212 Ukrainian dead troops only to discover no one from Ukraine was willing to accept them. On Saturday, the Ukrainian officials who were responsible for these exchanges failed to respond to an inquiry for comment. When asked about the matter on Tuesday, Kremlin spokesperson Dmitry Peskov stated that Russia was still willing to return the corpses and was in discussions with Kyiv regarding the topic, but did know how many bodies of Russian soldier Ukraine was prepared to give over. "There is still no final agreement." Contact is made and numbers are compared. We hope that this exchange will happen as soon as there's a final agreement," said Peskov. "There's one undisputed fact, and that is that the trailers mentioned earlier have been waiting on the border since several days to be transferred to the Ukrainian side. Everyone knows and sees this fact. Russian state media broadcast images of white trucks with bodies sealed in white bags parked near the border. (Reporting and writing by Dmitry Antonov, Editing by Guy Faulconbridge).
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South Africa's Telkom resumes dividends, shares jump 7%
Telkom, the South African telecoms firm, reported a 62.3% increase in its full-year earnings on Tuesday. The company also increased its free cash flow. This allowed it to resume dividends after a suspension of four years and even sweeten them with a special payout. The operator of South Africa’s largest fixed-line network, announced in 2020 that it would suspend dividends beginning 2021 for the next three years to save cash for spectrum auctions. After reaching its initial goal, the operator under pressure delayed dividend payments due to challenging market conditions. "This year, our strong performance and successful strategic execution have allowed us to distribute both a regular and special dividend. Telkom announced that the group would return 1.3 billion Rand ($73.28million) to shareholders. Telkom announced a final dividend per share of 163 cents and a special distribution of 98 cents, thanks to the proceeds of Swiftnet's mast and tower division. The operator has also raised its mid-single-digit revenue growth guidance from low-single-digit to mid single-digit. This is a result of its industry-leading revenue growth for mobile services and high fibre connectivity ratio. Telkom shares soared by 7% at 0849 GMT to 42.81 Rands after rising 10% on the opening day. Telkom, which is majority owned by the government and continues to operate, reported a headline profit per share of 467.5 cents for the year ending March 31. The revenue increased by 3.3%, to 43.8 billion Rands, exceeding expectations. This was due to the strong growth of mobile service revenues, which grew 10.2%, as well as fibre-related data revenues, which grew 10%. LSEG surveyed analysts who had predicted revenue of 43.5 billion Rand. Telkom's data and strategy are helping them gain substantial market share, according to SBG analyst Nadim Mohammed. The company's free cash flow increased to 2.8 billion Rand from 424 millions rand due to cost-optimization, revenue improvement and a disposal program. "Cash generation has been the best Telkom has ever seen for a long time." "They also had large assets disposals during the period, and these have also helped to reduce debt on their balance sheet," Peter Takaendesa said. Chief Investment Officer of Mergence Investment Managers.
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Copper prices fall on the back of uncertainty about trade talks and demand
The copper price fell on Tuesday, as investors avoided the market because of uncertainty over the U.S.-China talks and the impact the trade war will have on economic growth and metals demands. By 1000 GMT, the benchmark three-month copper price on London Metal Exchange had fallen 0.3% to $9,767 a metric ton, after having recovered 20% from its April lows, when it was at its lowest level since November 2023. "There is a lot complacency in the market right now." The volatility of the markets seems to be decreasing, even though there has been no breakthrough in trade negotiations with China," Ole Hansen said. He is head of commodity strategy for Saxo Bank Copenhagen. Tuesday in London, top U.S. officials and Chinese officials are expected to resume their trade negotiations for a second time. They hope to achieve a breakthrough on export controls of rare earths and related goods. The LME registered warehouses saw more copper inventories leave as traders took advantage higher U.S. metal prices in anticipation that U.S. president Donald Trump would impose tariffs after duties were levied against aluminium and steel. LME Copper Stocks Data showed that the eroding of 2,000 more tons, to 120,400 tonnes, occurred on Tuesday. The eroding had already fallen by half in the last three months. U.S. Comex Copper Futures fell 0.8% to $4.89 per lb. This brings the premium of Comex to the LME up to $1,000 per ton. The appetite for the New York market is waning, as the tariff announcement would be a binary one. It's unlikely that you could avoid some fireworks once the news was out. Traders await the results of an investigation Trump ordered on February regarding potential import tariffs for copper. In China, zinc prices on the Shanghai Futures Exchange have weakened for the third trading day. They are now down 1.3% at 21,845 Yuan per ton. This is the lowest price since late April. The Shanghai-based research firm SHMET reported that "China's demand for commodities has been weakening in recent months, and buyers are buying to meet their immediate requirements at lower prices." Other LME metals saw a 0.1% decline in aluminium to $2477 per metric ton. Nickel fell 0.7% to $15310, Zinc dropped 0.1%, lead was down 0.4% at $1978.50 and tin rose 0.1%, to $32,750. Hongmei Li, Singapore Additional Reporting; Vijay Kishore Editing.
Andy Home: Trump's tariff threats presage turbulent times for Dr Copper
Doctor Copper has been trying since late January to estimate the impact of U.S. tariffs on imports, ever since President Donald Trump included copper in his list of tariffs along with steel and aluminum.
After the launch of a Section 232 investigation - the same national security tool that paved Trump's way to steel and aluminum tariffs during his first term, and extended them in Trump’s current term - the threat is set to become a reality.
Tariff trade has played out so far in the arbitrage of the U.S. Copper price on CME and international copper prices traded on London Metal Exchange.
This may change, as financial arbitrage causes a realignment in flows on the physical market.
A raid on LME's inventory indicates that it has already happened.
Mind the Widening Gap
The LME copper product is an international contract that has delivery locations on all three continents. However, the CME contract is a U.S.-cleared product with only domestic delivery points.
Arbitrage between these two contracts is the ideal forum to trade the potential U.S. tariffs on imports.
When Trump mentioned aluminium, steel and copper as possible targets for tariffs in the same breath, the CME premium over London shot up to more than $1000 per metric ton.
The CME premium was based on the fact that LME copper traded just above $9,000 per tonne, implying a tariff of 10% on imports.
Transatlantic gap was steadily closing in absence of further comments by the Trump administration prior to Tuesday's shocking announcement that U.S. Import dependency would be subject of a National Security Investigation.
The U.S. premium for the CME's May contract has risen again from $500 to more than $800 per ton in the past 24 hours.
It is clear that the U.S. premium could be much higher if copper were to be subjected to the same tariff rate of 25% as steel and aluminum from next month.
LME STOCKS RAID
The LME price of three-month copper has remained stable at $9,500 per tonne, despite the CME price having risen sharply.
Early-year rallies have stalled because of concerns over how Trump's tariff policy, which is broader, will impact on global trade and growth. This is especially true in China, as it's the largest copper purchaser.
There's a lot of chaos beneath the calm surface, in the form time-spread instability.
The benchmark spread between three-months cash and the benchmark cash
The Valentine's Day massacre was a clearing-out of liquidity, but the tighter tone that followed is due to a clearance-out of physical stock held in LME Warehouses.
In preparation for the physical loading out, almost 100,000 tons of copper stored at LME have been cancelled in the last four working days.
The total on-warrant stocks of copper have fallen from 258,000 tons to 161,225 tonnes in just one week.
COMPLEX ARBITRAGE
It makes sense to send as much copper to the United States as possible, to take advantage of the metal being in place prior to tariffs.
The physical arbitrage trade is more complex than financial arbitrage. This was evident when the CME suffered a squeeze in May last year.
The CME list of brands that can be delivered is largely restricted to Canadian, domestic and South American producers. This reflects the refined import mix of copper in the United States.
LME stocks are largely made up of Chinese and Russian brands. These two brands together accounted 74% of the total stocks on warrant at the end January.
The United States banned imports of Russian metal about a year ago. Imports from China already face a 10% blanket duty.
Instead of LME-stored steel being shipped directly to the United States it is likely that South American shipments would be rerouted, and LME steel used to fill in the supply gaps.
As happened last year it is possible that Chinese producers deliver metal to LME storage in Asia due to a high U.S. Premium causing a global roundabout of metal.
Coming Home
The U.S. Secretary for Commerce Howard Lutnick is given 270 days to complete the Section 232 Report on Copper. However, it appears that this will be a fast-tracked process.
It is also clear that the results will be positive, as Lutnick accused international actors of "attacking [our] domestic production."
Lutnick told the press at a briefing on Tuesday that "it's time to bring copper home."
Tariffs alone are unlikely to reverse the trend of copper processing, where ever more capacity has migrated to China.
He's correct, there is probably a large amount of copper headed to the U.S. It all depends on where the copper comes from, and how much turmoil is created by transporting it to the U.S.
These are the opinions of the columnist, an author for.
(source: Reuters)