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Natalie Scott-Gray
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StoneX TV: Trump Tariff Setback Leaves Metal Markets In Limbo
By: Natalie Scott-Gray, Senior Metals Demand Analyst, EMEA and Asia region
Trump’s IEEPA-based Tariffs Are Struck Down by the Supreme Court – How Will This Impact the Outlook for the Base Metal Market?
On 20th February, the US Supreme Court released its opinion with justices divided 6-3, that the President does not have the authority to impose tariffs under International Emergency Economic Powers Act (IEEPA).
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LME 3M Copper Versus US Dollar
Source: Bloomberg, StoneX
LME 3M Base Metal Price Performance (2026=0
Source: Bloomberg, StoneX
LME 3M Base Metal Price Performance M/M (% Change%)
Source: Bloomberg, StoneX
What does this mean?
All tariffs enacted under the IEEPA have been deemed illegal. This includes:
- Country-by-country or “reciprocal” tariffs, which range from 34% for China to a 10% baseline for the rest of the world.
- The other is a 25% tariff Trump imposed on some goods from Canada, China and Mexico for what the administration said was their failure to curb the flow of fentanyl.
However, this ruling has not impacted any tariffs that remain under Section 232 or 301, in addition to any country-signed trade deals. In short, this means we still have:
- 50% tariffs on all aluminium and steel imports into the US, including derivative products (except for the UK at 25%)
- 50% tariffs on all finished and semi-finished copper products
- 25% tariffs on automotive and parts (exception of 10% to UK, 15% EU/Japan and South Korea and auto parts that qualify under USMCA).
- 10% tariffs on timber and derivatives
- 25% tariffs on semiconductors and certain derivative products
How has the US administration reacted?
A day after the ruling, the US administration outlined 10% tariffs to be effective 12:01am ET on February 24 based on Section 122 of the Trade Expansion Act of 1974. This tariff is effective for 150 days, expected to run to 24th July, unless authorized by an action of Congress.
Please note, President Trump outlined that these tariffs would be increased to 15%, however, based on the most recent (23rd February) US Customs and Border Protection bulletin, tariffs remain at 10%.
In addition to this, the bulletin has clarified that the following will be exempt:
- Imports eligible for the on-the-water exemption
- Certain food products
- Certain articles that qualify for the Civil Aircraft Agreement pursuant to GN 6 and are classified in specific tariff provisions
- Articles that qualify for USMCA
- Textile/apparel articles that qualify for DR-CAFTA
- Humanitarian donations
- Informational materials
- The Section 122 tariffs will not apply to entry summary lines on which 232 tariffs are paid (therefore, they will apply to the non-metal content of aluminium/steel/copper articles subject to 232 tariffs)
- Chapter 98 will provide duty relief
- Goods subject to Section 122 tariffs must be entered into an FTZ under PF status
What is Section 122?
What it permits: Section 122 gives the president the ability to impose tariffs to address “fundamental international payments problems.” He doesn’t need to wait for a federal agency to conduct an investigation before he can implement the tariffs.
Limitations: The conditions for using Section 122 powers are to remedy “large and serious” US balance-of-payments deficits, to help correct an international balance-of-payments disequilibrium, or to prevent an “imminent and significant” depreciation of the dollar.
The tariffs are capped at 15% and can only be imposed for up to 150 days. Congressional approval is required to keep the duties in place for longer.
Previous uses: Section 122 has never been used before.
What don’t we know?
There was no clarity as to the treatment of recently negotiated agreements with the EU, UK, and many others. US Trade Representative Greer indicated in a separate statement that the Administration would be conducting Section 301 investigations into trading partners’ unfair trade practices and continuing existing 301 investigations (example here China and Brazil).Additionally, he indicated that the Administration anticipates its recently conducted negotiations with various trade partners may remain in place. Greer noted that “our partners have been responsive and engaged in good-faith negotiations and agreements despite the pending litigation, and we are confident that all trade agreements negotiated by President Trump will remain in effect.”
Therefore, it remains unclear whether the 15% Section 122 tariffs will be an additional blanket tariff stacked on such prior agreements or whether the agreed-upon reciprocal tariff rates will continue to apply.
Meanwhile, the Supreme court ruling did not address whether the administration needed to issue refunds for tariff payments, with US Treasury Scott Bessent stating, “my sense is that could be dragged out over weeks, months, years”. Note, The IEEPA has cost importers ~$133.5Bn up to mid-December last year.
How will country tariffs be altered in response to the ruling?
If we look at the trade-weighted average tariff rates in percentage terms, then the biggest country-winners (i.e. those countries who have seen tariffs move lower) are Brazil, China, India, Canada, Mexico, Vietnam, Thailand, Malaysia and Taiwan. While overall tariffs are set to increase for the UK, Italy, Singapore, France, EU, Germany, South Korea, Netherlands, Japan, Switzerland and Ireland.
Source: Financial Times
How has the metal market reacted?
The initial response to the announcement from the Supreme Court last Friday caused a knee-jerk reaction in the US dollar, closing 0.1% down, in turn supporting the base metal suite.
However, as this stand in morning trading today, while the US dollar continues to come under pressure from the uncertain outlook for trade, the base metal market is little changed, even with the Chinese markets reopening after a week closure for Chinese New Year. The base metal suite remains on track for a monthly decline in February.
In our view, while a moderation in global tariffs provides a more bullish outlook for the industrial metals world, in reality we face further unpredictability in trade policy, especially upon the potential introduction of further Section 301 tariffs and the limited nature of Section 122 tariffs without Congressional approval. In addition to this, with Section 232 tariffs that impact copper, aluminium, steel, and automotive remaining unchanged, the distorted trade landscape and delay in potential investment decisions remain. Furthermore, we must address whether this latest set back for the Trump administration will result in an earlier ruling on tariffs on refined copper, which at present, the market only hold a 3% chance of. Note the deadline for the Department of Commerce to present a report to the President on domestic refining capacity and the market for refined copper falls on 30th June.
Looking ahead, while the markets continue to address these latest developments, eyes will be on 24th and 25th February, in which the Supreme Court have two more opinion days. Although the court never reveals in advance what opinions it will release, there are 11 ongoing cases, including the ruling on Lisa Cook (which will impact the outlook for the Federal Reserve’s independence).
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