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Copper Futures Surge 3% As Investors Shrug Off New Tariffs

September 18, 2018 at 16:03 by Andrew Moran

Copper futures surged as much as 3% on Tuesday as investors shrugged off the latest developments in the US-China trade war. The industrial metal has fallen sharply in recent months over concerns that the global trade spat may diminish demand for copper. Could copper reverse course and finish the year strong?

December copper futures advanced $0.075, or 2.8%, to $2.75 per pound at 15:30 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. The red metal is already on track for a weekly gain, but copper prices are still down 19% year-to-date.

On Monday, President Donald Trump announced that he was imposing a 10% tariff on roughly $200 billion worth of Chinese goods. The first series of taxes will go into effect next week, and the second round will commence on January 1. While a wide range of expensive consumer products were spared, such as Apple and Fitbit, the next round of tariffs could include these brands.

President Trump said in a statement:

For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies.  We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly.  But, so far, China has been unwilling to change its practices.

On Tuesday, the Chinese government retaliated with a tariff hike on $60 billion of US products. The Ministry of Finance confirmed that it would approve levies of 5% and 10% on more than 5,000 American items, including industrial chemicals, coffee, and honey. These are scheduled to go into effect on September 24.

Despite meetings and consultations, most experts believe that the trade dispute may linger for years.

William Zarit, chairman of the American Chamber of Commerce in China, averred in a statement:

The downward spiral that we have previously warned about now seems certain to materialize.

Contrary to views in Washington, China can — and will — dig its heels in and we are not optimistic about the prospect for a resolution in the short term. No one will emerge victorious from this counter-productive cycle.

Analysts say that the ballooning tariffs have been offset by increased infrastructure spending in Beijing. Because the economy has been sluggish, the government has been reversing its year-long and policy and instituted a series of stimulus measures. When countries announce infrastructure projects, copper prices rally because the industrial metal is a necessary component to construction endeavors.

The red metal posted further gains on a falling US dollar as the greenback weakened 0.05% to 94.61. A lower buck is good for dollar-pegged commodities because it makes it cheaper for foreign investors to acquire.

In other metal commodities, December gold futures shed $2.30, or 0.19%, to $1,203.50 per ounce. December silver futures dipped $0.03, or 0.2%, to $14.19 an ounce. December platinum futures soared $13.80, or 1.72%, to $814.70 an ounce. December palladium futures spiked $22.90, or 2.35%, to $999.90 per ounce.

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