LONDON, August 15 — The copper market is pricing in a bet: a 37% chance that the US will slap a tariff on refined copper imports from Chile by 2028. The signal comes not from a policy memo or a leaked draft, but from the mechanics of two exchanges. When the price of copper on New York’s COMEX rises above the London Metal Exchange’s quote by a clear margin, traders are, in effect, wagering on a future duty.
Societe Generale laid this out in a 10 August note: the premium embedded in New York contracts reflects the expected 30% tariff, and its size lets analysts reverse-engineer the implied probability of that tariff actually happening. The LME, the world’s oldest and most prominent marketplace for industrial metals, sets the global benchmark for copper.
COMEX, meanwhile, is the key US futures market for the red metal. The gap between the two is now a real-time barometer of where the money thinks US trade policy is headed.
The mechanism
The logic is straightforward. If traders anticipate a US tariff on Chilean copper, they will pay more for copper deliverable in New York—where the duty would apply—than in London, where it would not. The difference, or spread, between the two prices widens.
The larger that spread, the higher the market’s collective estimate of the tariff’s likelihood. On closer reading, the 37% probability is not a poll or a survey.
It is derived from the spread itself, which currently prices in a 30% duty as the expected cost. The measurable size of this premium allows analysts to translate it into a probability: 37%. But here is the catch: this is not a forecast from Washington.
It is a forecast from the market, built on the assumption that the tariff, if imposed, would be 30%. The number is a function of price, not policy.
Why Chile matters
Chile is the top global copper producer and a primary supplier to the US. Any duty on its refined copper would reverberate through supply chains that rely on the metal for everything from wiring to electric vehicles. The LME-COMEX spread, then, is not just a technical curiosity.
It is a leading indicator for a sector that underpins industrial activity on both sides of the Atlantic. The LME’s dominance as a pricing hub means its contracts reflect the global cost of copper, while COMEX captures the US-specific dynamics.
When the two diverge, follow the money: it is pointing to a potential trade barrier.
What to watch next
The spread will fluctuate as new information emerges—regulatory signals, political shifts, or changes in supply and demand. If the gap narrows, the market’s implied probability of a tariff will fall. If it widens, the opposite holds.
For now, the mechanics here are clear: the market is assigning a 37% chance to a 30% duty on Chilean copper by 2028. The question is whether Washington will confirm the bet.
