President Trump’s Inaugural Policy Speech – Base Metal Market Response – Quick Take
LME 3M Copper Versus US$ Intra-Day
Source: Bloomberg
Moves in the US dollar have been at the heart of base metal price direction over the last 48 hours, something we expect to remain in place in the days and/or weeks ahead as the markets try to absorb and anticipate what policy actions are to come.
Copper CME-LME Arb Versus CME Copper Stocks
Source: Bloomberg
What Where the Key Takeaways from the Policy Speech?
Immigration to Be a Key Focus Area
- Trump to sign on day one, a ‘national emergency’ on its Southern Boarder.
- Drug cartels will be known as terrorists.
- Enact the Alien Enemies Act of 1978 to eliminate all foreign gangs and criminals in the US.
Inflation to Be Tackled by Lowering Domestic Energy Prices
- Trump stated that the US will defeat record inflation, in part by reducing overspending, while also lowering the cost of energy products, “drill, baby drill”.
- Trump to sign a ‘National Emergency on Energy’ on day one.
Domestic Manufacturing to Be Supported: Automotives, Oil & Gas and Strategic Reserves a Focus Area
- The US will return to being a manufacturing nation again, the automotive industry to be built out
- Strategic reserves will be filled to the top, with oil and gas exported all over the world
Climate Policy to be Rolled Back
- Leave the Paris Agreement
- Revoke the US EV mandate
Trade Tariffs and Tax to Come In
- The US will overhaul the current trade system and implement tariffs and taxes on other countries to enrich domestic citizens. (An external revenue service will be put in place to collect all tariffs).
- Note, it was reported on 21st January that 25% tariffs will be implemented on Canada and Mexico by 1st February
USGS US % Import By Country
| Refined Imports | Canada | Mexico |
| Copper | 17% | 2% |
| Nickel | 49% | n/a |
| Lead | 30% | 12% |
| Zinc | 51% | 15% |
| Tin | n/a | n/a |
| Aluminium | 59% | 5% |
Source: USGS
Military Forces to Be Built Out
- To build the strongest military force the world has ever seen
- Military might would be used to end war, prevent war and win war. (Note, Trump mentioned ‘ending war’ twice over his speech).
The Gulf of Mexico to be renamed the Gulf of America
Supply Chain Ownership
- The US will ‘take back’ the Panama Canal from Chinese operation
Space Exploration
• The US to put its “stars and stripes” on Mars
Our View
The policy speech did not reveal any shocks to the market, with the delayed implementation of tariffs on Mexico and Canada being seen as a softer start than expected. When it comes to China, there too has been little in the way mentioned on the implementation of 60% tariffs, however, Bloomberg reported that staff have been ordered to investigate whether Beijing has complied with the trade deal signed during his first term, and that “meeting and calls” with Chinese President Xi will be taking place.
What Can We Expect Ahead?
The market is likely to remain firmly in risk-off mode in the near-term, with dollar movements at the centre of base metal price direction. However, looking to the months ahead, attention will shift to the impact that potential tariffs will play on the base metal market. In our view, tariffs (either phased or not) on key producing countries like Canada will likely provide short-term price support to the suite on supply concerns. However, in the longer-term, altered trade routes and any retaliation on tariffs could lead to economic shocks, uncertainty in investment and ultimately headwinds for the suite, especially if we see tensions rise between the US and China. Having said this, there is a lot of unpack from Trump policy speech with metal-intensive sectors forecast to be underpinned (driven by a renewal in domestic manufacturing, build out on military might, artificial intelligence and space exploration). However, this does come at the cost of support for the green transition, which has been the fastest growing area of demand for the base metals this decade.
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