It’s a pending new round of tariffs on copper imports that has alarmed industries from electric vehicles to renewable energy producers to military contractors to semiconductor manufacturers. The country relies on external sources for over half of its copper supply. Industry leaders have sounded the alarm that the demand for this strategic metal is set to explode. This massive surge is primarily driven by even faster growth of energy consuming industries. Artificial intelligence and blockchain technology promise to transform today’s knowledge economy even more radically.
The U.S. government has initiated a Section 232 investigation into copper. The study would be meant to evaluate the metal’s role in national security and economic security. Copper is critical to America’s electrification goals, but is critical to numerous industries connected to the defense industrial base. Despite its significance, the construction of new copper facilities takes approximately ten years, raising concerns about the U.S. ability to meet future demands in a timely manner.
Currently, the U.S. lacks robust electronic assembly capabilities for semiconductor chips, further complicating the supply chain for key technology sectors. While this ongoing investigation will eventually result in new policy, it remains unclear what the new policy changes will be and what they will look like.
Gregory Daco, chief economist at EY-Parthenon, offered an informative follow-up. As he put it, “We don’t know what’s going to be announced tomorrow, or what the landscape of trade policy is going to look like in the coming weeks and months.” This lack of certainty further complicates matters as industries brace for what could be a dramatic market transformation.
With demand for copper soaring, copper has taken on new-found importance in our world today. As professor of electrical and computer engineering at the University of Illinois Urbana-Champaign, John Dallesasse, puts it—that makes it “the crude oil of the 21st century.” Technological advancements are developing at a break-neck pace. This heavy ebondacy will increase demand for copper from purified formed into wires and cables.
Diederik Stadig, a health care sector economist for the Dutch multinational bank ING, thinks at least some branded production will eventually relocate to the U.S. He’s skeptical of a big spike in generic production. This declaration speaks to the reality of the struggle domestic production capabilities are having with the ever-growing global demand.
Adding to all of these other daunting challenges is the time-consuming process necessary to get new copper mines and refining facilities established. Dan Ikenson, an economist and trade policy scholar at Ikenomics Consulting, spelled out the big one. For example, it can take 16 to 18 years just to get the licenses and permits needed to operate a mine. This timeline underscores the need for the U.S. to find long-term solutions to secure a stable supply of copper.
Ikenson pointed to what we don’t produce those resources and how we’re dependent on the world for them. So now’s not the time to be provoking new, needless trade spats. He underscored the need to build strong relationships with top exporting countries. Our closest allies Canada, Chile and Peru are all critical partners in making sure we have a secure, stable stream of copper.
Numerous sectors are bracing for new tariffs and other policy shifts. They should be assessing the dangers of relying heavily on foreign sources for materials that are essential to their business. From the electrification of America to advancements in defense technology, demand for copper has never been greater. Returning to stable supply, policymakers need to address these supply chain vulnerabilities to do it.