Why Copper May Be More Important to the U.S. Economy Than Oil

As the U.S. grapples with the impact of tariffs on copper imports, prices for this critical metal are soaring to unprecedented heights. Analysts are now positioning copper as a primary driver of economic growth, even claiming that it could be more vital to the U.S. economy than oil.

The Rising Importance of Copper

Phil Flynn, a senior market analyst at Price Futures Group, stated that “Copper is the new crude oil,” reflecting its ubiquitous need across various sectors — from construction and automotive to electronics and telecommunications. Flynn articulated a concern over the metal’s scarcity, noting, “Everybody needs it, and we probably don’t have enough of it.”

Data from the U.S. Geological Survey emphasizes the severity of the supply-demand imbalance, revealing that domestic copper supplies have been outpaced by consumption for over five years. Between 2019 and 2023, the U.S. imported over 44% of its average annual refined copper usage, totaling approximately 1.7 million metric tons, as reported by S&P Global Market Intelligence.

The Economic Ramifications of Tariffs

In light of copper’s rising importance, President Donald Trump has directed the commerce secretary to investigate the national security implications of copper imports. This could lead to tariffs aimed at bolstering domestic production. However, Peter Boockvar, chief investment officer at Bleakley Financial Group, expressed skepticism regarding the rationale behind imposing tariffs on an already scarce resource. He pointed out that the U.S. is unlikely to ever produce enough copper domestically to meet consumption needs.

As a result of heightened demand and geopolitical considerations, copper prices reached record levels recently, with the U.S. benchmark for May’s contract on Comex reaching $5.374 a pound. The London Metal Exchange also demonstrated this trend, with three-month copper contracts nearing all-time highs.

Understanding Copper’s Multifaceted Role

Copper serves as a critical material in many industries. Its conductive properties make it an essential component in electrical systems — not just for traditional uses but also for emerging technologies. For instance, Rob Haworth, a senior investment strategist at U.S. Bank Asset Management, asserted that copper is crucial for energy creation, transmission, and storage. It fuels operational capabilities across sectors including construction, automotive, and technology.

According to the International Copper Association, a single metric ton of copper can enhance the functionality of 40 cars, power 100,000 mobile phones, and distribute electricity to 30 homes. Meanwhile, the growing demand for electric vehicles (EVs) and advancements in artificial intelligence are further intensifying the need for copper. For example, an average electric vehicle contains about 60 kg of copper, a significant increase compared to 24 kg in conventional gasoline-powered vehicles.

The National Security Perspective

The increasing reliance on copper for domestic energy and technological needs has compelled policymakers to consider the national security implications of importing this vital resource. Trump’s administration is exploring various methods to bolster domestic copper production, including potential tariffs and increased investments in domestic mining and refining.

Adam Estelle, president and CEO of the Copper Development Association, stated the importance of adopting an “all-of-the-above sourcing strategy,” which encompasses enhanced mining, smelting, refining, and recycling within the U.S. Estelle pointed out the need for continued trade with reliable partners to maintain an adequate supply of copper for domestic needs.

The Future of Copper

Copper’s importance extends beyond its immediate applications; it is poised to play a central role in meeting future electricity demands. Data centers, responsible for increasing electricity consumption, are projected to account for a growing share of total energy use in the coming years. This, coupled with the burgeoning EV market, spells an increasing demand trajectory for copper.

Flynn anticipates that copper prices could potentially double within the next four years if demand continues to outstrip supply. He called recent tariff discussions a crucial wake-up call about the structural undersupply of copper and its importance in achieving domestic energy and technological goals.

A Strategic Move Towards Domestic Production

The recent developments in U.S. copper policy underscore the urgency to secure domestic supplies of this essential metal. The proposed tariffs and investment strategies highlight the administration’s commitment to invigorating local production capabilities and ultimately establishing a more self-reliant industrial base.

In conclusion, as the geopolitical landscape continues to evolve, copper’s role in the U.S. economy is likely to expand. By recognizing copper’s critical status in both the present and future economic frameworks, policymakers can better prepare for emerging challenges and opportunities alike.