Copper spikes as Trump outlines potential 50% tariff

• Positive start in Europe on trade talk optimism.
• Copper spikes as Trump outlines potential 50% tariff.
• Chinese inflation on the rise, but market response remains muted.

A positive start in Europe this morning as traders position themselves in anticipation of a potential breakthrough in trade talks between the US and EU. German Chancellor Merz provided one such voice, noting that he is cautiously optimistic thanks to ongoing intensive contact with the US government. However, whilst there is a potential framework for a deal being put together, the apparent US insistence of a 17% tariff on EU agricultural goods does provide a potential roadblock going forward. This is where it becomes difficult to please all parties, as the priorities of the German (autos) will be very different to the French (agri).

US markets are taking a somewhat cautious tone this week following Monday’s initial gains in the wake of Trump’s tariff deadline extension. Unfortunately, we have since seen a raft of announcements that suggest that tariffs are set to move significantly higher, with the President stating that this will be the final deadline, with tariffs kicking in on 1 August. Meanwhile, the big volatility seen yesterday came from copper prices, with Trump’s warning of a potential 50% tax on imports sparking a 17% rally for the industrial metal. With roughly half of US copper coming from abroad, there is a clear desire to remove this dependency. The fact that we have seen roughly 6% of that spike reversed highlights both a relatively oversupplied market and the prospect of Trump slashing that 50% figure once he realises the impact of such a drastic move on US businesses. Notably, with the premium between New York and London copper futures hitting record levels, the impact of these prospective tariffs are already going to having an effect on importers.

Despite a marginal return to positive inflation in June—China's first annual increase in consumer prices since January—market reaction was less than optimistic, with both the yuan and the Hang Seng weakening in response. Headline CPI rose 0.1% year-on-year, beating expectations of a flat reading, driven by e-commerce promotions, state subsidies, and a perceived easing in trade tensions. However, the positive print masked underlying softness: food prices continued to decline for a fifth consecutive month, and the monthly CPI figure still fell by 0.1%, marking the fourth monthly drop this year. While core inflation hit a 14-month high at 0.7%—suggesting some underlying demand recovery—the market appeared more concerned about the sustainability of this momentum, especially in light of fresh external risks like Trump's 50% copper tariff. The yuan's slide and Hang Seng’s drop highlight persistent investor caution, underscoring doubts about the durability of China’s domestic rebound amid renewed geopolitical headwinds.