Tariff uncertainty far from over

Markets continue to face significant uncertainty over global trade as President Trump continues to announce new tariffs, with copper the latest target.

Today marked the initial deadline for Trump’s 90-day pause to sweeping global tariffs that rocked markets in April of this year. There was some cheer however, as the President extended the deadline to August 1^st, giving more time for countries to strike a trade deal with the US.

The US dollar index has gained almost 1% in the past five days as strong job numbers, and the tariff deadline extension could give the Federal reserve pause from cutting rates any time soon. Gold has slipped below $3,300 per ounce, and is down 1.2% so far this week.

The trade war is far from over however. A list of 14 countries (such as Japan and South Korea) was released that would face higher tariffs on August 1^st, with more expected to be announced in the coming days. A post from the President suggesting 50% tariffs on copper imports however has seen the metal’s price spike to new all-time highs.

Copper is now trading at a significant premium in the US compared to other markets. A similar phenomenon was seen with gold and silver at the start of the year, and traders will likely move quickly to try and import copper into the US ahead of any tariffs, causing liquidity issues and driving the price higher still.

While the jump in copper is unlikely to directly impact gold, some analysts have suggested it could provide a further boost for silver. Copper’s industrial demand continues to grow based on an increasingly electric world and the need for ever more data centres, and silver is also benefiting from that demand.

Silver remains just below $37 per ounce at the moment, a key resistance level it has failed to break through and hold. It is however building solid support above $36 per ounce, and that still represents a near 14-year high. In GBP, silver is holding around £27 per ounce, and is close to 2011’s GBP record of £29.26. In euros, silver is even closer to breaking records. It hit a high of €32.88 in 2011 and is currently trading at €31.23.

The EU is believed to be close to striking a trade deal with the US, but it is not yet confirmed, and the deal could still include tariffs above recent levels. If the euro should depreciate against the dollar, silver could climb to new all-time highs quickly.

Although markets were pleased to see the tariff deadline extended, and that trade deals are happening, it is important to note that the rates secured in these trade deals are still higher than before and that the deadline extension only prolongs uncertainty. It is impossible to know which of the Presidents threats will be carried out, and which are negotiating tactics, leaving businesses in limbo in the meantime.