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(Bloomberg) — Two weeks ago, copper prices were surging as traders warned that threatened US tariffs on the metal would squeeze global supplies. Now, copper bulls are confronting one of the market’s worst-ever selloffs as President Donald Trump’s broader trade war upends the outlook for demand.

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Prices for the metal viewed as a bellwether for the global economy plunged more than 10% last week, collapsing alongside equity markets as Trump’s latest tariffs proved far more onerous than investors feared — and prompted retaliatory measures from China.

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Friday’s 6.3% selloff on the London Metal Exchange was the biggest since March 2020, and brought prices down to $8,780 a ton. US futures on New York’s Comex fared even worse. It’s a whipsawing move after Trump’s pledges to impose import tariffs on copper helped drive US prices to an all-time high late last month.

The rout has already sent buyers fleeing —  with sky-high offers for Comex-deliverable cargoes drying up instantly as US prices plunged, according to three people active in the market.

The turnabout creates a dramatic backdrop for the miners, traders and investors descending on the Chilean capital of Santiago this week for Cesco Week, one of the copper industry’s biggest annual events. 

Traders and manufacturers have been racing to ship huge volumes of metal to the US before any levies are imposed, in a trend that risked draining supplies and raising prices for buyers in the rest of the world. Major metals traders Mercuria Energy Group Ltd. and Trafigura Group last month said prices could hit $12,000 a ton as copper flows gravitated toward the US.

But a chorus of bullish forecasts linked to copper’s tightening supply dynamics has rapidly given way to cacophony of warnings that the latest rout could worsen as universal import tariffs announced by Trump last week hammer demand in the US and beyond. While America only accounts for about 6% of global copper usage, a broader slowdown in US imports of manufactured goods could have swift and severe consequences for top consumer China and other major industrial economies.

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“We’re certainly not recommending that anyone try to catch the falling knife,” Max Layton, global head of commodities research at Citigroup Inc., said by phone. “This is a massive change in global trading activity, and with it, we could see the kind of correction that we’ll remember in five, 10 or 20 years.”

The consequences are already being felt in the physical copper market. Just last month, traders were paying as much as $500 a ton on top of futures prices to get hold of copper that could be readily shipped and sold at higher prices in the US. That’s about four or five times the normal rate, but importers still stood to make a fortune providing they could get their metal to the US before tariffs landed.

Many initially thought that would take months, but following indications that they could begin much sooner, demand for spot cargoes has plunged. The $500 surcharges have disappeared, and there are now effectively no bids in the market, according to three people active in the market.

With the US import rush seemingly coming to an abrupt end, buyers in the rest of the world will be left with much more metal available — and Trump’s sweeping tariffs mean manufacturers may soon want much less.

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JPMorgan Chase & Co. now expects the US will fall into a recession this year, while UBS Group AG says that for every one-percentage-point drop in US growth, open trade-oriented Asian economies like Taiwan and South Korea could see their output drop by two.

In the copper market itself, Goldman Sachs Group Inc. warns that an escalation in retaliatory tariffs could keep prices below $9,000 a ton this quarter, at least temporarily. Citigroup Inc. sees non-US prices averaging $8,500 for the quarter, with risks now heavily skewed to the downside.

“Clearly markets are factoring in the negative demand implications of the US reciprocal tariffs and the likely tariff responses from major trading partners,” said David Wilson, senior commodities strategist at BNP Paribas, who warned late last month that copper could collapse once tariffs were rolled out. “We expect the downtrend to continue at least in the short term.”

Producers — whose share prices were also hammered in last week’s rout — typically point to the supportive longer-term outlook for copper as demand gets a lift from the energy transition and a US data-center boom. After all, while US futures fell the most since 2011 on Friday, they are only around two-month lows.

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“No one should panic. The fundamentals haven’t changed,” said Victor Gobitz, who heads startup Quilla Resources Inc. and has overseen some of Peru’s biggest mines. “Copper is imperative to reduce fossil fuel consumption.”

If the trade war triggers a recession, prices could tumble to as low as $3 a pound — or about $6,600 a ton —  said Juan Ignacio Guzman, head of Chilean mineral consulting firm GEM. On the flip side, if Beijing reacts with more open policies toward the rest of the world, taking over the role the US played in recent decades, Guzman said “there could be a boom for copper and a final weakening of the US economy, but not necessarily with global repercussions.”

Longer term, copper’s outlook is also supported by the difficulties in finding new deposits and funding their development. The industry will need bigger margins to justify the investments needed to lift supply, said Evy Hambro, global head of thematic and sector investing at BlackRock Inc.

“We need to see a higher price in order to be able to encourage that investment into new supply,” Hambro said in an interview.

—With assistance from Yvonne Yue Li.

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