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US President Donald Trump’s unpredictable approach to tariffs is causing major uncertainty across the metals and energy trading markets, as well as undermining longer-term investments, industry insiders say. 

Trump’s second term has so far been characterised by a raft of tariff-related actions, with levies often announced, delayed or amended with little warning.

Tariffs have escalated trade tensions between the US and China, while also targeting historic trading partners including Canada and the EU, as the administration seeks to bring manufacturing onshore and reduce reliance on imports. 

The commodities sector is having to respond fast. Traders are “intensely research-based organisations” which take medium-term views on price movements in the market, said Vitol chief financial officer Jeff Dellapina, speaking at last week’s Financial Times Global Commodities Summit in Lausanne. 

Doubt over whether a tariff announcement will materialise creates “confusion” and makes it difficult to judge market risk, ultimately squeezing margins, Dellapina said. 

“The impact of statements when we wake up in the morning… can overwhelm any of the research we do,” he said. “It naturally draws away risk capital from the market, which then serves to compress volatility, which then obviously has put us in much tighter trading ranges.” 

He added: “The cost is the temporary reduction of opportunity to make margin. The cost isn’t going to bleed us to death, but it’s something we just have to live with.” 

Richard Dolcetti, chief financial officer at commodity trader CCI, said at the same event that the “volatility of the news… and the constant change always makes you reassess”, which he said makes it harder to devise a longer-term growth strategy. 

Large commodity traders are increasingly diversifying their businesses by using cash accumulated during a highly profitable period in 2022 and 2023 to invest in assets such as oil refineries and terminals, or mining operations. 

“We all have incremental capital that we still haven’t invested from the past few years, and the real question becomes the strategies that we’ve developed to grow, using that capital – will those continue to be profitable strategies, or do we need to pivot?” Dolcetti said.  

“You can’t do that on a daily basis. You still need to have a vision and think long term.” 

 

Metals and minerals 

The impact of tariff uncertainty varies across different commodities. In the metals sector, Trump has already introduced 25% tariffs on steel or aluminium imports, prompting industry condemnation and retaliatory measures from Canada and the EU. 

This move does not appear to have significantly distorted the trading market. US prices of aluminium and steel “just adjust upwards by the tariff amount”, said Graeme Train, head of metals and minerals analysis at Trafigura. 

But in copper, the possibility of 25% tariffs on US imports – potentially introduced earlier than initially anticipated – has sparked a buying frenzy and driven prices higher. 

In February, Trump ordered an investigation into copper imports and national security risks, spanning raw materials, concentrates and scrap, signalling future levies on imports. 

The investigation, to be carried out by the Commerce Department, was initially scheduled to take up to 270 days, with a further 90-day presidential review period.  

But analysts now expect the review to conclude more swiftly. The market “is expecting that to happen”, Trafigura’s Train said. 

“Aluminum and steel are very different to copper, in that you have capacity in place. It’s running at lower utilisation,” he said. “With copper, there’s not a quick solution to bringing refined metal into the market.” 

The anticipation of tariffs has driven US copper prices to record highs, several hundred dollars per tonne higher than three-month copper futures on the London Metal Exchange, creating an incentive for suppliers to ship to the US. 

“The price of copper in the US today is US$1,400 higher than the rest of the world,” said Mercuria’s global head of metals and minerals, Kostas Bintas, on March 25. 

Bloomberg reported last week that US copper imports had risen to 500,000 tons by late March, citing Mercuria estimations. The figure is well above regular monthly levels of around 70,000 tons. 

Longer-term positions are also becoming complicated. Michael Barton, managing partner and deputy group CEO at metals investment firm Orion Resource Partners, said in Lausanne that geopolitics is becoming as important as economics in critical minerals. 

The interplay of those two factors is “going to be chaos” on a long-term timespan, he said. 

 

Oil and gas 

The unpredictability of US tariffs has also destabilised energy flows, such as oil and gas trade between the US and Canada. 

Trump initially said he would introduce 25% on all imports from Canada from February, then on February 1 lowered the tariff for energy imports to 10%.  

Two days later, those measures were suspended for 30 days, and despite Trump suggesting in late February they could be delayed further, they took effect on March 4.  

Bill Reed, chief executive of US-headquartered CCI – which imports natural gas from Canada – told the Financial Times event the company has been dealing with “a lot of uncertainty”. 

“You’re scrambling around, you’re trying to figure out your supply options, you’re trying to look at your contractual terms to pass it onto your buyers,” he said. “And there are different situations for every single contract that’s coming across the border. That obviously consumes an enormous amount of resources.” 

For the three-day period in February when tariffs were in effect, Reed added there is “really no mechanism to even know what liabilities are incurred… between different counterparties”. 

“You can imagine that as an executive or a risk manager, you start to say, ‘well, what am I going to do? How much capital am I going to deploy? What am I going to invest in? Well, maybe we should just wait and see, because we’re not sure what’s going to happen’,” he said. 

At the same time, Trump has threatened to impose secondary tariffs on Russian and Iranian oil, which would penalise countries for trading with either nation. 

Oil prices rose this week in response to the news. ING commodities strategists Warren Patterson and Ewa Manthley wrote this week that because China and India are key buyers of Russian crude, and also export large volumes to the US, such action “would push prices much higher”. 

 

Spillover effects 

Globally, the upheaval in the commodity trading market is expected to result in a “deeper fragmentation of trade”, said Luz Maria de la Mora, director of UN Trade and Development’s commodities division. 

Export-dependent developing countries “are having to choose whether to trade with the US, whether to trade with China, or what part of the supply chain they can be in”, she said at last week’s event. “That doesn’t help in terms of the opportunities this can create for the global economy.” 

Trump’s actions, and the retaliatory measures taken by its trading partners, represent a threat to the rules-based trading system and undermine the credibility of the World Trade Organization, she said. 

“For example, reciprocity – this idea that tariffs have to be reciprocal – we still need to understand what that means,” de la Mora said. 

Frédéric Barnaud, chief commercial officer of German state-owned energy company SEFE, said regulatory instability can harm 10-year or 15-year investments in contracts or assets, which rely on an international framework of cooperation and commerce. 

Fragmentation caused by tariffs or rule changes is “difficult to explain, because sometimes there is no economic logic behind all of this”, said Dmytro Sakharuk, chief executive of D.Trading. “It hurts trade [and] it adds more uncertainty for all of us, because we are all driven by economic considerations.”