Copper escapes disaster, aluminum cannot avoid calamity. Why do Trump's tariffs show favoritism?

Why did the Trump administration have such different attitudes towards refined copper, which is exempt from import tariffs, and aluminum, which is subject to a high 50% tariff? According to CCTV News, on July 30 local time, U.S. President Trump signed a notice announcing that starting August 1, only semi-finished products such as copper pipes, copper wires, and cables would be subject to a 50% tariff, while refined copper, including cathode copper and anode copper, which is mainstream in international trade, would be exempt. This unexpected decision to tax only semi-finished products like copper wires, pipes, and sheets has shaken the copper market. Since the announcement on Wednesday, U.S. copper prices have fallen by more than 20%. In contrast, aluminum metal imported into the U.S. since June has faced a 50% tariff. Behind this, major producers in the copper industry, such as Freeport-McMoRan, lobbied that tariffs could weaken U.S. copper production and emphasized the importance of refined copper to U.S. manufacturing, leading to this exemption policy. Meanwhile, U.S. aluminum producers have strongly supported the tariff policy, believing it is crucial for protecting U.S. aluminum smelting capacity. Additionally, electricity costs are also an important influencing factor, with different electricity cost structures determining the level of trade protection for each metal industry. Aluminum Industry Actively Lobbied for Policy Support According to media reports on Tuesday, U.S. aluminum producer Century Aluminum has been a strong supporter of the tariff policy, believing it is vital for protecting U.S. aluminum smelting capacity. The company stated in a June announcement: Century Aluminum appreciates President Trump’s unwavering defense of key metals in U.S. production by raising aluminum tariffs to 50%. The disadvantage in electricity costs has led to a significant shrinkage of U.S. aluminum smelting capacity. Currently, there are only 4 active aluminum smelters in the U.S., down from 23 in 1995. According to data from the U.S. Geological Survey, U.S. primary aluminum production fell from 3.35 million metric tons in 1995 to 1.6 million metric tons in 2015, and further declined to 670,000 metric tons last year. This decline in capacity provides a strong argument for the aluminum industry to seek trade protection and explains why aluminum metal can receive a high 50% tariff protection. Copper Industry Lobbying Power "Facilitated Exemption" The exemption of refined copper from tariffs reflects its importance to U.S. manufacturing and the influence of the industry, including major producer Freeport-McMoRan. Earlier this year, the company warned in response to the U.S. government's inquiry into copper import tariffs that tariffs could weaken U.S. copper production. In its submitted comments, Freeport-McMoRan pointed out: A global trade war could lead to an economic slowdown. A slowdown in U.S. or global economic growth would negatively impact copper prices, and due to the high cost structure of domestic copper production, this could threaten the viability of domestic copper industry This argument strategy stands in stark contrast to the aluminum industry. The copper industry emphasizes the adverse effects of the trade war, rather than seeking protection; the aluminum industry actively seeks tariff protection to survive. The different cost structures and market positions determine the distinctly different lobbying strategies and policy outcomes of the two industries. Differences in Electricity Costs Determine Policy Bias Electricity costs account for different proportions in the U.S. metal smelting industry, directly influencing the government's tariff policy orientation. According to Macquarie Bank's estimates, energy costs account for approximately 50% and 30% of total costs for primary aluminum and copper production, respectively. U.S. aluminum smelters face higher electricity costs than copper producers, which gives the aluminum industry a stronger economic rationale in seeking trade protection. Analysts point out that compared to the UAE, Bahrain, and the world's largest producer, China, U.S. electricity costs are at a disadvantage. Macquarie analyst Marcus Garvey stated that there is no economic basis for building any new aluminum smelting capacity without significant intervention. Even with intervention, it may not be sufficient. The main difficulty faced by investors is the challenge of obtaining competitive long-term electricity procurement agreements. Risk Warning and Disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk