US President Donald Trump's threat of a 50% tariff on copper imports is raising alarm in the US car sector as it could make it even harder for carmakers and suppliers to absorb border taxes and rising costs, executives and industry experts say.
The duties on their own may be manageable, but prices of the red metal vital for making cars, in particular in wire harnesses and motors for electric vehicles, have soared to record highs.
The US market is heavily reliant on imported copper, aluminium and steel, and developing new capacity could take years so users are scrambling to buy metal from a limited number of suppliers, spurring price rises.
Added to import tariffs on the metals, and higher prices in the US, the extra costs are compounding the financial strain on carmakers and parts suppliers, interviews with a dozen executives, industry analysts and experts show.
Carmakers have been relying on inventories to avoid raising prices, but could be forced to pass on mounting import tax costs to consumers.
Some, including Ford and Toyota, have announced hikes to mitigate other Trump-induced tariffs, while Porsche expects a €300m (R6.29bn) hit to results from tariffs for April and May alone.
"This (a copper tariff) complicates a difficult situation" for the car industry, said Daan de Jonge, lead analyst for copper demand and prices at Benchmark Mineral Intelligence.
Trump's announcement of the tariff ast week propelled prices on US platform Comex to a record $5,682 (R102,044) a pound (0,453kg) or $12,526 (R225,018) a metric ton, a premium of more than $2,920 (R52,459) a ton over the price on the London Metal Exchange, around $9,600 (R172,469) a ton, which the market uses as the global benchmark. The rate is effective from August 1.
The US Midwest duty-paid aluminium premium paid on top of the benchmark LME price for physical delivery has tripled to 60 US cents (R10,71) a pound since Trump was inaugurated.
In the same time, the LME price has slipped 3% to $2,604 (R46,783) a metric ton. US top carmakers GM , Ford and Jeep maker Stellantis declined to comment.
Suppliers pass on some costs
After a chaotic week in the copper market, suppliers to carmakers have asked their customers to pay more for their product because they cannot afford the additional costs, experts said.
A source at a major car supplier in the US market said the company had seen "meaningful" impact from elevated copper, aluminium and steel prices. This creates commercial friction and structural cost gaps, said the source, who spoke on condition of anonymity because they were not authorised to discuss the issue publicly.
Even before a tariff takes effect, users are paying more for their US copper. Takashi Imamura, an executive officer at Japanese trading house Marubeni said a copper tariff would mean higher costs for US consumers.
"When they (the US government) reconsider the damage, my final expectation is they will reduce or eliminate the tariffs," Imamura said.
Parts suppliers are feeling the squeeze. Melanie White, president of suspension parts maker Hellwig Products, said steel prices have quadrupled since 2018. Steel tariffs have caused a rush to source from US providers, making it harder to secure supplies.
White said the roughly 50-person business has cut costs by putting off equipment purchases or not rehiring for some vacant positions.
"It has affected a lot of things," she said.
Costas Benchmark's De Jonge said at pre-tariff rates, steel, aluminium and copper accounted for around 5% of a vehicle's production costs in the US. With tariffs, that rises to up to 9%, he said.
Based on estimates from Cox Automotive and Benchmark Mineral Intelligence on tariffs in place combined with the planned copper rates, the US car industry would pay on average minimum duty of $1,700 (R30,538) for every car made in the US and $3,500 (R62,873) per car imported from Canada and Mexico that complies with the USMCA trade deal.
It would be as much as $5,700 (R102,395) for every car imported from elsewhere. The numbers add up fast in a low-margin industry where the average US new vehicle selling price in June hit $46,233 (R830,538), according to consultancy JD Power.
Consultancy CRU Group estimated the average combustion-engine or hybrid car requires about 24kg of copper, while the average fully-electric car needs around 59kg. Dan Hearsch, global co-leader for automotive and industrials at consultancy AlixPartners, said supplier agreements tend to be indexed to copper prices and revised every few months.
However, the spike in copper prices last week has forced car suppliers to go to customers and "we need to talk about this on top of all our other tariff conversations'," Hearsch said.
Some in the industry remain skeptical the copper tariff will be implemented.
Trump has a history of delaying or walking back tariff threats. Andy Leyland, co-founder of supply chain specialist SC Insights, said a copper tariff would likely be short-lived because higher inflation caused by border taxes will collide with the reality of the US political calendar. where midterm elections will be held in November 2026.
"Most Americans don't give a damn about foreign policy," Leyland said.
"Inflation is the only concern people have."
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.