Copper’s flashing a powerful warning about expectations for economic growth after US President Donald Trump chose to embark on a major escalation of his administration’s global trade war, imposing tariffs on $34bn of imports from China, which vowed to respond in kind.
The metal has lost more than $1 000 since closing at a four-year high of $7 332 a metric ton on June 7. The slump deepened on Friday, with prices down 0.8% to $6 297.50 on the London Metal Exchange, set for the biggest weekly loss since 2015.
“Copper has become the lightning rod for concerns about economic growth amid the rising trade dispute,” Australia & New Zealand Banking said in a report, while suggesting that even though there were signs of slowing expansion, the metal’s recent steep decline was overdone.
Metals including copper and zinc have weakened in recent weeks on concern that the litany of trade disputes initiated by Trump - which also cover wrangles with the European Union, Canada and Mexico - will escalate and harm the global economy.
On Thursday, the LMEX Metals Index hit the lowest since August 2017, and most base metals lost ground on Friday.
“Supply disruptions remain a threat and shifts in China’s consumption patterns will see demand for refined copper remain strong. If trade tension subsides, we would expect copper prices to recovery strongly in the second half of 2018.”
In the run-up to the tariffs deadline that passed on Friday, Bank of England Governor Mark Carney said the rise of protectionism will affect trade flows, push up import costs, and have an impact on confidence, investment and demand.