Chile and United States
Analysis

What will Chile do if Washington imposes tariffs on copper?

Bnamericas
What will Chile do if Washington imposes tariffs on copper?

The Chilean foreign ministry will assess the impact of potential tariffs on copper, following threats from US President Donald Trump earlier this week.

Although it remains uncertain whether the US will impose tariffs on copper, and, if so, whether they would apply to concentrates, cathodes or blister copper, foreign minister Alberto van Klaveren has assembled a task force to analyze the potential effects.

Experts from the international economic relations department and the finance ministry will meet to analyze how bilateral trade flows could be affected.

A tariff would impact Chile, the world’s largest copper producer, but the US also reliesheavily on imports for national security reasons.

The US “is deficient in copper, according to records from 2023, it produced 1.1Mt and consumed 1.8Mt,” Álvaro Merino, director of consulting firm Núcleo Minero, wrote in a column.

Merino highlighted that a free trade agreement between Chile and the US guarantees that bilateral trade is tariff free.

The FTA established that neither party can increase or impose customs tariffs, so "if restrictions are imposed on the entry of Chilean copper, the provisions on dispute settlement established in the treaty will have to be implemented and other markets where we can place our main mining product must be evaluated," he added.

Last year, Chile exported copper worth US$50.9bn, accounting for 50.8% of total exports. The US was Chile’s second-largest copper export destination, according to government data.

Trump’s plans to impose tariffs on copper, steel and aluminum could increase costs for US consumers, given the domestic supply shortfall and the time required to ramp up local production, according to Reuters.

Yet, during his election campaign, Trump promised to combat inflation and lower the cost of living. He recently signed an executive order requiring all federal agencies to implement emergency price relief measures for consumers.

Meanwhile, the US Department of Energy has designated copper a critical mineral due to its essential role for electrification and manufacturing technologies. Additionally, a bipartisan critical minerals bill is under review in congress, reinforcing the importance of copper for the domestic supply chain.

Despite the US’s vast copper reserves, domestic production is too low to achieve self-sufficiency. Companies like Freeport-McMoRan and Hudbay Minerals are seeking to expand operations, but permitting and regulatory hurdles hinder progress, Rich Nolan, head of the US national mining association, wrote in a column.

The dependence on copper imports "leaves us vulnerable to geopolitical risks and supply chain disruptions," he wrote.

In a statement, Manuel Viera, the president of Chile’s mining chamber, urged authorities to “address aspects such as the diversification of the client portfolio for national copper. What would happen if China does the same?” he said, referring to the potential restrictions.

Calling for calm in the face of Washington’s threats, Chilean mining association Sonami said in a press release that “the evidence shows that there are no legal, economic or strategic incentives to impose this type of measure, particularly on Chile, due to its role as a key supplier.”

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