Copper tariff is the wrong answer to the right question

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Uncle Sam has a copper problem. In very round numbers, the United States produces 1 million tons of red metal, and consumes 2 million. The deficit is filled from the outside, creating a potential political geographical vulnerability. However, even inside the United States, there is sufficient copper to go to the tour, for those brave, rich and patient enough to extract it – especially if you suddenly lose the cheapest imports of their attractiveness. A case, then, for definitions.

This, at least, is the logic of the White House. President Donald Trump pledged to slap the fees on copper imports, after he already identified the metal as decisive inputs of US prosperity. This prompted the price of future copper contracts on the American markets about five on Tuesday. Of course, it is unlikely that the vitality tariff is 50 percent is the end result. Now negotiations and surrender come.

There is a legitimate problem that must be solved. Copper, although abundant, is increasingly costly and difficult to extract. For years, it was clear that the supply crisis waved on the horizon, with the natural growth of demand enlarged due to the transition to green energy and “electrification”. For example, the electric car uses 2.5 times copper like gasoline marriage, and it is estimated at the S& P Global.

Now, there are other pressures as well. Artificial intelligence, with its dependence on data centers and thirst for power, has created a new copper consumer. Increased defense budgets add more pressure. But while mining has become a matter of urgency, it can take new decades and billions of dollars. The decision, a site owned by Rio Tinto and BHP, could be the largest copper mine in the United States, but has been depleted in legal disputes for years.

The customs tariff – in theory – can stimulate new production, by raising the price. Blackrock estimated that $ 12,000 per ton is the price that the drilling begins to appear to be financially subject to financially, and after Trump said he was “doing copper”, and this is where the US price is almost sits. But commercial fees are a sharp tool. They have a fatal defect: miners plan their investments over decades, while the customs tariff can fade with a stroke of the pen.

Moreover, removing copper from the ground is only the first problem. The second makes it useless. The United States barely lights with copper these days, because it is usually an expensive, dirty and unpopular process. This wholesale activity has turned into China, which is now entering nearly half of the show in the world, compared to 3 percent in the United States, according to the American geological survey. Some American fascinations have been reused as data centers.

This does not mean that “copper act” is not glorious. The subsidies have its place. Although miners need years of certainty of Earth’s comfort, technicians are not such recipients. Companies such as Freeport-McMORAN and the BHP-backed CEIBO exchange, in new ways to extract and refine more copper from existing mines. High prices may give them Fillip. Definitions are a bad way to solve the demand problem, but it is a decent way to focus minds.

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