United States President Donald Trump upped the stakes in his global trade war on Tuesday, with the announcement of plans to impose a 50 percent tariff on all imported copper alongside a 20 percent levy on pharmaceutical products immediately, followed by a rise in one year’s time.
Speaking to CNBC shortly after a Cabinet meeting, Secretary of Commerce Howard Lutnick said his department’s investigation into copper imports had concluded and that he expected the levy “likely to be put in place end of July – maybe August 1”.
“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 added.
Trump also indicated that he would apply a tariff as high as 200 percent on foreign-made medicines in about a year’s time. “We’re going to give people about a year, year and a half to come in, and after that they’re gonna be tariffed if they have to bring the pharmaceuticals into the country at a very high rate, like 200 percent,” he said.
Finally, he warned there would be “no extensions” on the August 1 deadline when “reciprocal” country tariffs kick in, having delayed that from July 9 on Monday.
Trump’s sectoral tariffs on copper and pharmaceuticals – which were initially exempted from his sweeping “Liberation Day” tariffs on April 2 – are distinct from country-wide tariffs. A new 50 percent rate on copper would match recently imposed levies on steel and aluminium products.
How reliant is the US on copper imports and who will tariffs hurt?
Very. The US produces only just over half the refined copper it consumes each year. The remaining amount, just shy of one million tonnes, is imported.
More than two-thirds of American copper is mined in Arizona, where the development of a massive new mine has been delayed for more than a decade because of environmental concerns.
While Trump has consistently framed his metals tariffs as a way to counter China’s dominance of the global market, the US, in fact, imports most of its refined copper from the Americas.
Chile supplied 65 percent of America’s refined copper imports in 2023, followed by Canada at 17 percent and Peru at 6 percent, according to the United States Geological Survey (USGS).
Maximo Pacheco, the chairman of Chile’s state-run copper producer Codelcom, said: “We have to see whether this will apply to all countries or only some,” in response to Trump’s move.
How reliant is the US on pharmaceutical imports and who will tariffs hurt?
The US pharmaceutical industry is also highly reliant on imports.
In fact, almost half of the value of active pharmaceutical ingredients (APIs) for the US market were imported from abroad in 2021.
India supplies 18 percent of America’s APIs; China, 13 percent; and the rest come mainly from the European Union.
At the same time, about 40 percent of the drugs ready for consumption in the US are manufactured abroad (with India dominating, at one-third of the total). Other countries, including Australia and Ireland, also rely on the US market for their pharmaceutical exports.
Countries which rely on the US market for their pharmaceutical exports are likely to be worried.
For example, the US accounts for 38 percent of Australia’s overseas shipments of pharmaceuticals.
After Trump’s announcement, Australia’s Treasurer Jim Chalmers told the Australian Broadcasting Corporation that: “These are obviously very concerning developments.
“Our pharmaceutical industry is much more exposed to the US market. And that’s why we’re seeking – urgently seeking – some more detail on what’s been announced,” Chalmers said.
How does the US compare with China on copper and pharmaceuticals?
Copper
Although the US is the second-largest consumer of copper in the world, the majority of its miners process their copper in China and other parts of Asia, where costs are cheaper.
China is the world’s largest consumer of copper – its share of global copper demand exceeds 50 percent. But, unlike in the US, much of that copper is processed by local firms.
Most of China’s 23.4 million tonnes of copper concentrate imports also come from Chile, Peru and Mexico.
Meanwhile, the biggest export destinations for China’s copper products are Thailand, Vietnam and South Korea.
In terms of copper-producing capacity, the Chinese copper smelting sector – which involves extracting the red metal from its ore by heating it to high temperatures – dwarfs all others, including that of the US.
China had dozens of copper smelters operating in 2024. Meanwhile, the US has only two primary copper smelters, according to the USGS.
Compared with China, the US copper sector also contends with comparatively higher energy costs, a smaller smelting capacity and less government support.
Chinese firms, moreover, often own their own mines, smelters and assembly units, reducing transaction costs and streamlining logistics.
Pharmaceuticals
The US is home to the world’s largest pharmaceutical industry by production value (ie, the total monetary value of pharmaceutical goods produced), clocking in at roughly $602bn in 2023, well ahead of China and Germany.
Despite this, it still needed to import $212bn of pharmaceuticals in 2024. In particular, the US remains highly dependent on API imports from India and China, so Trump’s tariffs could be seen as an effort to boost domestic API production.
However, some economists have warned that higher tariffs on APIs will hurt American patients in the form of higher medicine costs.
Furthermore, building new manufacturing facilities to boost domestic production could take many years. Industry experts warn that the country’s infrastructure is not currently equipped to handle new API factories.
“There are over 400 key ingredients or APIs that need to be produced to be fully integrated, and the US has no personnel resources since big pharma left API manufacturing 20 years ago [to achieve lower production costs],” Stanley Chao, managing director of All In Consulting, told the BioSpace website.
How have markets responded to the new tariff announcements?
Repurposing power and transport systems to run on renewable energy will require more refined copper than the companies in the US that produce it can currently supply.
The metal is critical for the production of electric vehicles, military hardware, the power grid and many consumer goods. Trump’s threat of higher tariffs could, therefore, disrupt supply flows.
For this reason, copper future contracts – the standard gauge for the metal’s price – jumped more than 12 percent to a record high after Trump announced the planned tariff.
The S&P 500 index of drugmakers dropped slightly after Trump’s comments, while shares of Eli Lilly, Merck and Pfizer also trended down amid fears about the potential hit to sales.
But the overall financial market reaction to Trump’s shifting tariff landscape has so far remained calm – unlike the chaos which greeted his “Liberation Day” tariff announcements in early April.
Is this another example of TACO?
Global financial markets are becoming “desensitised” to Trump’s tariff moves, said CGS International Securities Group’s chief executive, Carol Fong.
Speaking on a panel at the Reuters Next Asia summit in Singapore on Wednesday, she said investors were no longer reacting as strongly to tariff changes and announcements.
“Look what happened in the last two days when the tariff [deadline] lapsed, the market didn’t react badly and I think the market itself has been a bit desensitised,” Fong said.
Indeed, financiers have established a name for the president’s policy flip-flopping. It’s called the Taco theory: “Trump Always Chickens Out”.
Washington, so the theory goes, does not have a high tolerance for economic pressure and will be quick to back off when tariffs cause pain.
Market watchers will now be looking at copper and pharmaceuticals to see if Trump uses his familiar playbook over the coming months.