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Copper prices fall outside US after Trump's 50% tariff

The London Metal Exchange and Shanghai Futures Exchange saw a drop in copper prices on Wednesday, as the announcement of U.S. tariffs on copper signaled the end of a long-running arbitrage trade which had pulled the metal from the global markets.

U.S. president Donald Trump announced on Tuesday that he would announce 50% tariffs on copper. U.S. Comex Copper futures rose more than 12%, reaching a new record high.

The U.S. Commerce Department's Howard Lutnick announced shortly after that the copper tariffs were likely to be implemented by the end or August 1 of this year.

The announcement was like a thunderous boom in the middle night. A 50% tariff is higher than expected.

Since the announcement of the tariff investigation in February, traders from around the world have sent copper to the U.S. as they anticipated higher prices. Comex inventories have reached their highest level since last year.

The days of this trade are numbered, given the short time left to move the copper before the deadline. This could potentially lead to a release of supply from outside the U.S.

Prices reflected a shift in the market. In the wake of a Comex record, the LME three-month contract for copper fell by 1.2%, to $9,675 a metric ton, at 0346 GMT. The most traded copper contract on SHFE also dropped 1.1%, to 78.580 yuan (10,944.29) per ton.

Michael Wu, an analyst for copper at the Shanghai Metals Market said that there are few buyers in Asia who want to deliver copper to the U.S. given the short time left before the deadline. He added that the only shipments likely to meet the deadline will be those from Latin America.

LME nickel dropped 0.5% to $14,965 per ton. Lead fell 0.6% to $2,000, while tin eased by 0.2% to $33,370. Zinc was down 0.4% to $2709 and aluminium was down 0.5% to $2574.

SHFE nickel dropped 1.4% to 118.960 yuan per ton. Lead gained 0.5% at 17,195 yuan. Zinc was unchanged at 22,010, aluminium rose 0.2% to 20.525 yuan and tin increased 0.2% to 264.880 yuan.

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(source: Reuters)