Copper is only a top-five industrial metal. It’s one of the most conductive metals on Earth, used in residential as well as industrial construction. It’s in all of our cars, phones, and home appliances, it’s a raw material used in most industrial processes, and most important of all, it only exists in limited supply, in mines scattered around the Earth.

So you’d think today’s sweeping 50% tariff on all US copper imports would have been bigger news. Or even, news at all.

The US produces 1.1 million tons of copper per year. We consume 1.6 million tons per year. Meaning we import around 500 million tons of copper per year, worth about $2.71 billion using today’s closing price. The price, admittedly, is not that high. But copper is such a commonly used intermediate product, like steel and aluminum, or silicon, that the price increase will absolutely ripple through across the economy, magnifying its impact.

So why no reaction?

In trump 1, the stock market was the barometer of his economic policy. He judged himself by the S&P’s performance, going harder when it went higher and going softer when it went lower. Overall, we got a really good market and not a whole lot of damage economically. A pretty good few years, save some bad headlines and bad non-economic stuff.

But in July 2025, everyone eats out on TACO Tuesday. A quick timeline, to recap:

• Feb 1 – 10% tariff on China
• Feb 10 – 25% steel, aluminum tariff
• Mar 3 – China tariff up to 20%
• Apr 2 – LIBERATION DAY!!! The big chart of shoddily-calculated tariffs on every country the US trades with, with a 10% floor
• Apr 8 – China tariff up to 145%
• Apr 9 – 90-day pause from Liberation Day rates for all other countries, new tariff rate is 10% globally sans-China
• May 12 – China & US agree to lower mutual tariff rate to 115%. (omg)
• June 11 – China lowers its tariff rate with US to 10%, US lowers its tariff rate with China to 55%.
• July 8 – 50% tariff on copper

It’s gotten a little excessive at this point. We’ve gotten into the car, strapped ourselves in, clicked up the hill, dropped from the top of the coaster, rode it down and back up the second hill, and now we’re waiting to get our picture taken. The big thrill we experienced at first, in the form of hoarding and terrible sentiment surveys, has passed.

If you’re a long time reader of this blog, you’ll remember a couple of months ago, I told you to not put so much stock into those sentiment surveys. They are secondary data at best, in my backward-focused, accounting-driven mind, because they measure what people are feeling, not what people are doing. If the people start doing that stuff, it will show up in harder data.

Sentiment has recovered somewhat. Inflation expectations have moderated at a bit higher level. Unemployment has risen somewhat, and the labor force participation rate has dropped somewhat. Housing disinflation continues to mask the newly created tariff inflation, and PCE seems moderated at around 2.4%.

This is the economic measure of a new reality governed by mass deportations and general uncertainty. We should expect to see lower hiring and higher firing levels. This does not by itself mean we are tipping into recession.

But even as the shock of tariff announcements abates, and price increases start to make their way through corporate earnings reports and margins, and then into prices, the uncertainty created by a constantly-fluctuating fiscal policy continues to paralyze the economy.

Construction Spending in May was down 0.3% from April, that being itself 0.4% below March. Continuing Unemployment Claims from the week ending June 28 are up 5.6% from the end of January. Retail Sales are up 3.3% year-on-year, essentially flat if you factor in inflation, and down 0.9% month-on-month, after ballooning in March and April.

This is an economy that has adjusted to the uncertainty of erratic tariff policy, by shedding some jobs, stocking up at first, and then hunkering down, and putting a lot of plans on hold, or on the chopping block.

Tariffs of this scale, and this broad a brush, will take time to get through into the real economy. Back in April, I predicted we’d begin to see tariff-led inflation in CPI and PCE data at the end of May. I think there might be a linear sort of process that we will be able to track, that gives us an approximation of where and how much the inflation is.

Right now, the Average US Tariff Rate sits at just above 30%. That’s heavily concentrated in China, minus electronics, and Raw Materials. The import numbers for those categories are not world-breaking, but they impact everything down-stream, and only do that as fast as companies purchase them and use them.

Soon, it will be Q2 2025 earnings season, and we’ll get the chance to see how tariffs are impacting corporate income statements in earnest for the first time. The real bad tariffs only kicked in in April, so Q1’s earnings reports only really had worries about tariffs, not tariffs themselves. If we see corporate Gross Margins compress, that is likely the result of existing tariffs (can’t promise about any new ones!). If this happens, we’re likely to hear about it in earnings calls, and we’re likely to see some slowing in dividend increases and share buyback programs.

It will take time until prices go up in a meaningful way. After the 90-day pause went into effect and the TACO trade took over, I started calling for 4% CPI inflation by December. Housing is in its third year of disinflation or outright deflation, and as mass deportations continue to shrink the sice of the American population, prices may moderate. At that point, tariffs will be the main driver of inflation. It’s up to comanies themselves how much it will affect prices, but the American Investor Class is not going to accept permanently higher p/e ratios for their “safer” funds. Price growth will eventually be the norm, enough for complaining about it to be street language.

4% CPI by 2026 is an aggressive claim, and I wouldn’t be surprised if it takes until June and I’m just early. But that’s a reflection of a world with persistent price increases at the grocery store, hardware store, and mall, and not much anywhere else. 4% CPI by 2026 may lay upon the claim that more sweeping tariffs are on their way. I’m not ready to make such a call at this time. But for now, it’s just now beginning to happen.

These tariffs, while flung out of trump’s mouth like it’s the air he breathes, seem to be structural in nature. Just as Biden never got rid of trump 1’s existing China tariffs, so do trump 2’s new crazy tariffs seem to be here to stay.

The Fed expects a one-time increase in the general price level, like it’s expecting a hurricane and gas station closures and price gouging. I respect the Fed a ton and write about it plenty, but that’s the wrong approach to take. Companies will be hit with the tariffs, at the wholesale, business-to-business level, at once. But they will determine for themselves how to recover that cost, and how long to take doing that. They likely will not simply raise their prices by the amount of the tariff in one massive go. They will spread out these increases over time.

It might feel like normal. But we will be able to measure how fast they’re raising prices in the next periods, compare that against both the high-inflation years of 2021-22 and the low-inflation years of 2023-24, and see how structural the price increases really are.

I suspect it will be more than the Fed thinks.

But don’t just take my word for it. Watch the data for yourself and see how things develop. I hope you’ve gotten your panic buying out of the way, because we’re too far into the roller coaster ride to get off now.

Categories: Economics, Economics - Fiscal Policy, trade war

Tags: corporate, Economics, financial, fiscal policy, inflation, policy, Stock Market, tariffs