Metal commodities have come under pressure - ING

US President Donald Trump carried out his threat over the weekend and imposed tariffs of 25% on Canada and Mexico and 10% on China, starting on Tuesday. Canada and Mexico already vowed to retaliate against US tariffs with their own measures, while China has pledged "corresponding countermeasures" to Trump's levies on Chinese exports. Tariff threats have kept metals markets on edge since Trump's win in the presidential election in November, ING's commodity experts Ewa Manthey and Warren Patterson note.

Tariffs are a major headwind to metals

"Tariffs on metals are likely to hit Canada the hardest. Canada accounts for over half of US Aluminum imports by value. The country is also the second biggest, behind Chile, source of Copper, and it's the biggest supplier of steel to the US, followed by Brazil and Mexico. The US President said that Copper tariffs will take a little bit longer to implement than those of Aluminum and steel."

"Tariffs are a major headwind to metals. Inflationary in nature, tariffs could limit interest rate cuts from the US Federal Reserve. At the same time, higher rates along with higher tariffs and greater geopolitical uncertainty will push up the dollar, providing headwinds to industrial metals demand. Tariffs are also likely to result in higher domestic prices in the US. For Aluminum, tariffs will result in higher prices in the US, representing a significant upside risk to the US Midwest premium this year."

"Back in 2018 Trump imposed a 10% duty on imported Aluminum and a 25% tariff on imported steel to promote domestic metal production. The tariffs on Canada and Mexico were lifted a year later after a new free-trade agreement was negotiated between the two countries and the US."